Natural Gas Price Concealed

The recent natural gas price increases are destined to get worse. Here is why. The Public Service Commission approved rate increases that don’t allow some utilities to fully recover their gas purchase costs. Example: Let’s say the PSC approves a rate of $10/mcf and the gas company has to purchase gas at the market price of $12/mcf. Then the gas company bills customers at the approved rate of $10/mcf and puts the balance of $2/mcf on the books to be recovered in future rate cases. Now the utility is entitled to a rate of return on this investment and possibly interest. This strategy will work only if gas prices move down sharply. If gas moves up in price, the customer will have to bear the cost of then current price increases plus the cost of the under recovered amount from the previous period. In this example, the result is additional 20% increase in addition to the period increase.

When this happens, the public will blame the utility for doing what it was ordered to do by the PSC over utility objections. We should pay as we go so there are no surprises.

If prices go up as expected, consumers are in for a shock as a result of the PSC concealing the real price.