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Public Hearings to be held for Gas Adjustments
Two public hearings are scheduled for proposed changes to the natural gas rate ordinance by the Department of Public Utilities (DPU). The proposed changes don’t increase the fixed rates adopted last fall. Instead, they include an increase to the variable rate cap, an additional recovery rate component and a compensatory minimum value for the variable portion of the gas rate.
The first public hearing will be held at the regular monthly Board of Public Utilities (BPU) meeting on February 15 at 5:30 pm. If approved by BPU, a second public hearing will take place at the March 28 County Council meeting at 6:00 p.m. Both meetings are held in a hybrid fashion so the public may attend in person in Council Chambers or online via Zoom using the link ladpu.com/ratehearing. The ordinance changes must be adopted by the County Council before they can be put in place. If adopted, they will take effect in April 2023.
The proposed changes are in response to rapidly escalating commodity costs paid by the utility. DPU uses a pass-through gas rate, meaning customers pay a variable rate that changes monthly based on the actual costs paid by DPU to receive the commodity that is provided to customers. The variable rate has been in place since 2013 and did not reach the do-not-exceed variable rate cap of $0.99/therm until two years ago. It has now been reached five times.
Cap increase
Each time the cap is enacted, a portion of the commodity expense recovery is shifted to a later date. When the cap is not enacted, over and under collections are calculated as part of the variable rate through a prior month adjustment calculation. Currently, rising gas prices that exceed the cap cause prior month under-collection amounts to spread over several months. The proposed ordinance increases the cap from $0.99/therm to $4.00/therm. The variable cost of gas that DPU has paid over the past two years, based on San Juan Index pricing, has ranged between $0.24/therm and $3.30/therm.
Recovery rate component
Escalating costs that are not being fully recovered under the current ordinance’s not-to-exceed cap of $0.99/therm have caused a $7.5 million shortfall in DPU’s natural gas fund. To address this shortfall, the proposed ordinance includes a $0.44/therm sunsetting recovery rate mechanism. If approved, this rate will be applied to gas billings until expenses are fully recuperated or until two years from adoption—whichever occurs first.
Compensatory minimum
When gas prices are especially volatile, the pass-through rate can drop to $0.00/therm. The proposed ordinance sets a minimum value of $0.11/therm for the variable portion of the gas rate to soften month-to-month rate swings caused by volatile commodity costs.
More information about the proposed rates, including a detailed FAQ document, can be found online at: https://ladpu.com/rates under the folder “Proposed & Pending Rate Changes.”
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