Winter gas rate hikes give customers chills

As expected, natural gas rates for Southern Missouri Gas Co. LP have increased approximately 7 percent for the winter season, according to a Missouri Public Service Commission news release.

Southern Missouri Gas serves approximately 7,250 natural gas customers in Douglas, Howell, Texas, Webster and Wright counties. The rate change, which began Oct. 1, came after a scheduled winter season filing reviewed and accepted by the Missouri PSC.

Under this filing, residential customers pay 83 cents per cubit foot of gas, an increase of about 8.8 cents per cubit foot.

Approximately 65 percent to 80 percent of a customer’s natural gas bill reflects the cost of natural gas from wholesale suppliers, according to the commission. Missouri PSC does not regulate wholesale costs – the cost local natural gas companies must pay to its suppliers.

Missouri PSC does conduct an annual regulatory review to ensure that regulated gas companies make prudent decisions in securing natural gas supplies for their customers.

According to Bill Burks, City Utilities chief operating officer, the wholesale market price for natural gas is nearly 50 percent higher than it was at this time last year. Customer rates reflect the market prices, which are unregulated and primarily driven by supply and demand.

CU natural gas prices fluctuate monthly, depending on the wholesale cost. In recent months, CU’s rates have remained at about 79 cents per therm, however, an increase is expected in November.

“They’ve started creeping back up pretty high again,” Burks said. “When it goes up, our customers are going to feel the impact of that almost immediately.”

CU is not regulated by the Missouri PSC, as are independent and investor-owned utility companies.

“Our rate structure is governed right here at home with our board and City Council,” Burks said.

CU pricing has various factors: the price of gas stored up during the summer, wholesale prices, long-term contract pricing and spot market purchases, Burks said.

Burks said reasons for the higher wholesale prices include natural disasters, such as Hurricane Ivan, which shut down some Gulf of Mexico well production a month ago, and a knee-jerk reaction to the price of crude oil, which remains above $50 per barrel. However, Burks points out that a connection between oil and natural gas prices hardly exists.

“They’ll track each other just as a perception,” he said.

Burks gives a cautious outlook. “If the weather stays real mild like it is right now, we may see some real softening of the gas prices. If it turns really cold in the next two or three weeks, we could see even more upward pressure on the price of natural gas,” he said. “It’s really hard to predict. The industry is going into the heating season with a pretty much all-time high volume of gas in storage, so there’s not that there is a shortage there.”

CU natural gas rates peaked in July this year at about 83 cents per therm. The previous high was 87 cents in March 2003.