The Gas Cost Adjustment (GCA) is designed to recover or return the pass-through natural gas costs which are largely beyond our control.
For the last few months, our gas costs have been higher than the revenue collected from customers. We have been able to absorb these costs to this point, but a rate change is needed to maintain the organization’s financial condition.
Colorado Springs City Council has approved an increase of $0.1338 per hundred cubic feet (CCF) effective July 1, 2009.
Business bill impact
The change will increase the typical industrial utility bill by 4.7 percent and the typical commercial utility bill by 11.1 percent.
Outlook for this winter
If future gas consumption and wholesale costs hold similar to our forecasts, we may be in a position to lower the GCA very early in 2010.
How the Gas Cost Adjustment works
The rate per hundred cubic feet (CCF) is changed periodically to reflect Springs Utilities’ current and projected costs for natural gas. GCA costs are passed on to customers on a dollar-for-dollar basis with no markup. We do not earn a profit from the cost of natural gas.
What we’re doing to keep rates stable
Other utilities raise or lower their GCA rates every month. Our customers have told us that they don’t like their rates to fluctuate that frequently. Therefore, we’ve developed strategies that allow us to keep rates more stable. We accomplish this through our gas hedging program, year-round purchasing and underground storage capabilities. Additionally, Springs Utilities absorbs some of the financial volatility, which reduces the need for monthly price changes. As a result, this is the first change to natural gas rates since January 2008.
Our hedging program
Our natural gas hedging program, which started in 1997, works like an insurance policy to protect us and our customers from volatile energy prices. We currently hedge about 50 percent of our anticipated summer gas supply and about 80 percent of expected winter supply. The remainder is purchased on the spot market. This strategy provides relative price stability and predictability for our customers while allowing us to take advantage of market opportunities when they exist.
Sometimes the market price is higher than our hedged price, sometimes its lower. Over the years our price has been lower than the market most of the time.
Our gas prepay program
We leverage our strong credit rating and ability to borrow tax-free to prepay for 20 percent of our gas supply. The 30-year agreement, put in place in 2008, is reducing our gas costs by about $5 million per year. This is an ongoing savings of $1.75 per month for typical residential customers compared to what the cost would be without the program.
Some of the lowest energy bills in the U.S.
In the Pikes Peak region, we have some of the lowest utility rates in the nation. We annually compare our rates to other western cities and, every year, we rank among the lowest.
