City delays decision on whether to cut price of natural gas

Published 11:45 am Thursday, April 26, 2012

Customers of the City of Vicksburg’s gas system will have to wait until mid-May to learn if they will get a break on their natural gas bills.

“It will be sometime in May before we have the information to decide whether we can reduce the price of gas,” Mayor Paul Winfield said after a Wednesday afternoon meeting with Utility Management Corp. of Flowood, the city’s energy consultants for gas.

Winfield called the meeting to discuss reducing the city’s gas rates in the wake of a drop in natural gas prices to below $2 per 1,000 cubic feet, or mcf. Utility Management President Howard Randolph said the company will analyze the gas system’s operations before recommending whether to reduce the rates. He said the analysis will take at least two weeks to complete.

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“We want to do this right,” he said. “We don’t want to recommend a rate reduction and then six weeks later you have to raise the rates.”

He said the analysis examines the system’s fixed costs for operation and maintenance, and anticipated costs such as capital programs. The company also will look at what the city is paying in gas transmission and storage costs.

The board is looking at one major capital cost, a projected $5.5 million project to replace the city’s water and gas meters with more efficient digital meters which will produce more accurate information on use. No date has been set for the project.

City purchasing director Tim Smith said the city buys its natural gas in August to lock down a low price for January when gas use begins to climb. He said the city uses an average of 700 million cubic feet, or mmcf, a year. He said about 500 mmcf is used in the winter.

The city’s gas rates are set by ordinance, using an escalating scale that begins with a minimum price and rises or falls based on the amount of gas used by consumers.

The minimum, or base, rate for domestic use is $9.45 per month for the first 500 cubic feet of gas for customers inside the city limits and $11.81 per month for customers outside the city limits. The industrial rate is $12.06 per 1,000 cubic feet for the first 50,000 cubic feet.

The city also has a price of gas adjustment provision that automatically kicks in if the price of gas increases.

South Ward Alderman Sid Beauman said the PGA was added in 2008 when gas prices fluctuated to high extremes.

“At one point, we were selling gas to our customers for less than we were buying it,” he said. “It was almost like subsidizing our customers.”

“Gas prices are at a 12-year low, and that’s a good thing,” Randolph said. “But you have to look at things like reserves, cost of operation and if you have a place to store those reserves.”

Randolph said the analysis will be thorough, adding, “after we complete it, we’ll come back with a recommendation to either reduce your base rate or keep it the same. We won’t recommend raising it.”