Posted: December 06, 2017
Tagged As: budgeting, Energy, Energy Bills, Energy Planning, Natural Gas

Natural gas prices from your natural gas utility can change up to four time per year (at January 1st, April 1st, July 1st, and October 1st), generally referred to as the Quarterly Rate Adjustment Mechanism (QRAM). In addition, there are also commodity and delivery “adjustments,” which can occur as an additional cost or a credit on your bill, which makes determining the actual rate somewhat confusing. This can all make budgeting for natural gas costs a challenge for municipalities. With roots dating back to 1988 under the name “GASAMO,” the LAS Natural Gas Program is built specifically for budget stability and price predictability by offering a single natural gas commodity rate for 365 days.  Here’s how it works.

The program makes use of a four-year purchasing strategy, allocating each of the various purchases to a particular program year.  The volume and price of each of those purchases will vary depending on the purchase date and the volume purchased.  The goal of the program at the beginning of a Program Year, which runs November 1st to October 31st, is to have 85-90% of the required program volume purchased, and leave the remaining portion exposed to spot market rates.  Future years also have volume goals – 60% for the following program year, 40% for two years down the road, and 20% and 10% for three and four years out, respectively.

The price for any given year is the weighed average of all purchases made for that program year.  For the 10-15% that remains exposed to spot market rates, a contingency is built into the program price.  During annual reviews of the program, years where the contingency apportions a higher price to the 10-15% of volume exposed to the spot market than actually occurs, LAS rebates members for the difference, usually in the area of 1.0 – 1.5 ¢/m³.  The rebate is not an annual guaranteed, though in recent years it has occurred regularly.

Current natural gas utility rates, as of October 1, 2017, range from 10.558 ¢/m³ to 17.7694 ¢/m³ (note that rates referenced are residential rates, and municipal or “business” account rates may vary slightly).  The current LAS Natural Gas price is 11.9 ¢/m³, and that rate is applicable until October 31, 2017.  Additionally, no line item for “adjustments” appears on the bill, and the billing process with you current utility will remain the same.

Budgeting for natural gas costs doesn’t need to be a challenge.  If your municipality is currently on utility rates and would like to stabilize the commodity portion of your bill, perhaps it’s time to take a closer look at the LAS Natural Gas Program.

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