Trusted local news leader for Kingman, Arizona & Mohave County
Tue, Sept. 24

UniSource rates to decrease, however ...

Thank the less-than-exact formula that calculates the cost of providing natural gas when you see an average 3.6 percent reduction in gas bills starting Oct. 1 and continuing into April.

Northern Arizona residents will benefit from a four-cent-per-therm decrease following a vote last week by the Arizona Corporation Commission.

Using the average 107 therms (one therm is about 96.7 cubic feet of natural gas), UniSource Energy Services customers can expect to save about $4.28 on a $123 gas bill.

The reduction is a result of the ACC awarding credits due to over-charging based on a rate formula that's meant to protect users from fluctuations in the energy market.

UniSource spokesman Joe Salkowski explained that the company charges for the cost of delivering gas to the customer as well as the gas itself, which is passed on to users without any markups in accordance with an ACC formula called the Purchased Gas Adjustor.

"The PGA is based on a 12-month rolling average of wholesale gas costs, and so it sort of floats up and down depending on the whole sale cost of the gas that we buy for our customers," Salkowski said. While the formula restricts extreme market shifts in the price of gas itself, the result of the formula is that it "often fails to collect exactly what we pay in gas."

The PGA "often fails to recover the full costs in rises, and in those situations we ask the Commission for a surcharge," he said. "In this case, falling gas prices resulted in an over-collection of gas costs from customers, so as a result we asked the Commission for a credit to more quickly refund those costs to the customer."

According to documents from the ACC, "(UniSource) explained that the credit increase was warranted because, under the terms of the recent El Paso Natural Gas Company rate case settlement ..., (UniSource) is entitled to a $2 million refund that will be credited directly to the PGA bank balance."

The down side

While the winter savings will run through April, the overall cost of heating and cooking and doing whatever else people do with their gas may not go down overall. Two factors could influence the opposite effect, actually.

While UniSource doesn't earn a profit on the price of the gas - as it only charges for delivery, service and the cost of operations - the company does charge the same amount it pays for the resource itself, and that price can fluctuate.

"Even as we are refunding over-collected gas revenues, the cost of gas could increase to the point that gas costs reflected on this winter's bills could rise, so that's the part of the bill that we have no control over," Salkowski said. UniSource does control the rates for service, although it hasn't for a while. When UniSource bought-out Citizens Communications Electric and Gas Divisions in 2003, the new owner agreed not to increase its rates until August 2007.

According to Salkowski, the energy provider's rates haven't changed since then, meaning that UniSource's current charges reflect 2003 costs for delivery, piping, crews, property costs on offices and other operating expenses.

Now that UniSource is free from that agreement, a request for new rates is pending that would increase average residential customer gas bills approximately 7 percent over the course of a year when implemented, Salkowski said.

New rates will be based on costs incurred by UniSource in 2005. That means whatever the new rates are set at, they still will be three years behind the current market costs for providing the service, Salkowski said. The ACC has the final say, however. So while its certain "at some point, there will be another rate case," he said, "we'll have to see what our (2005) costs justify."

Double downside

On the electricity side of things, UniSource also has a request pending before the ACC that could result in a 4.4 percent increase, or about $4 per month, for Mohave County customers, according to Salkowski. The rate increases for gas and electricity are expected to go before the ACC before year's end.

Looking further ahead, the forecast gets cooler; cooler, here, meaning as much as a 16 percent increase in rates.

UniSource currently gets all its power from Pinnacle West Energy out of Phoenix - and at a good rate, according to Salkowski. But the contract ends in May 2008, "so in June, by June, we need to have a portfolio of energy resources to replace that contract."

It's unlikely that UniSource will be able to get the same price from Pinnacle West, so "in all likelihood, there will be a cost increase in the PPFAC (Purchased Power and Fuel Adjustment Clause). And that's above and beyond the service rates increase," he said. The company is unsure what the price increase will be, but one figure is that market trends are pointing toward a possible 16 percent increase for electricity.

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