Pipeline rate case adds layer of complexity to upcoming Choice Gas selection period

 

ACE will work to assist customers in making an informed choice 


The two-week Nebraska Choice Gas selection period is quickly approaching  (April 15-28) and, like every year since the late 1990s, community-owned and not-for-profit ACE is gearing up to assist residential and commercial customers in making an informed choice and to offer competitive pricing options.

The good news for this year is natural gas prices are expected to remain near historical lows, providing customers with continued overall low retail rate options from which to choose.

For ACE and other competing suppliers, this year’s selection period also comes with a challenge: Offering pricing options without knowing the full cost of delivering natural gas to customers.

This scenario was brought on by a pipeline rate case working its way through the Federal Energy Regulatory Commission (FERC). The rate case, filed by Tallgrass Interstate Gas Transmission (Tallgrass), is not expected to have a final ruling until after the selection period. This leaves ACE and the other suppliers in the position of offering natural gas rates without knowing the total transport costs to deliver the natural gas.

All natural gas delivered to customers in the Choice Gas program is shipped through the Tallgrass pipeline system regardless of supplier selected.

Understanding transport cost

Included on each customer’s natural gas bill are several cost components for the delivery of natural gas. One of these components is the transportation cost of shipping natural gas by pipeline from its origin to homes and businesses. The transportation cost is divided into two sections:

1) From the well head to the city gate using the interstate pipeline system (Tallgrass). This cost is embedded in the supplier rate for natural gas and is listed as “commodity charge” on natural gas bills.

2) From the city gate to your community for delivery to homes/businesses using the local distribution system (Black Hills formerly SourceGas). This is a separate charge by Black Hills/SourceGas and is listed as a “distribution charge” on natural gas bills.

In October 2015, Tallgrass filed a rate request with FERC to update its rate design, tariff and transportation and storage rates. The rate increase request is significant—the average increase is approximately 80 percent higher than Tallgrass’ current transport rate. This is the first time in 17 years Tallgrass has filed such a case.

Timing of rate case ruling

Since a final ruling on the rate case is expected after the selection period, this puts ACE and other suppliers in the position of having to factor an unknown pass-through cost into pricing options.

Impact on Choice Gas suppliers and customers

The ruling on this case likely will result in increased transportation costs for suppliers, and as a pass-through cost, ultimately end-use customers. The unknown cost likely will add some complexity and confusion into selecting a supplier. Each supplier will have its own pricing structure to address the unknown pipeline cost. ACE is taking steps to educate customers prior to the selection period and will be actively educating and informing customers during the selection period so they can ultimately choose the best rate and price option for them.

ACE is here to help

As each supplier will have its own pricing options to address the uncertainty of the Tallgrass rate filing, this year could be more confusing for customers who call suppliers seeking competitive pricing options. Some suppliers may quote lower rates based on current pipeline transportation costs but prices will likely increase once the pipeline rate case is settled. Other suppliers may quote prices based on anticipated pipeline transportation cost increases.

ACE encourages all customers to ask suppliers if their price quotes are subject to change throughout the gas year, which runs from June 1, 2016 to May 31, 2017.

And as always, ACE is here to assist Choice Gas customers in making an informed decision. Customers are encouraged to call ACE at (800) 454-4759 if they have questions. ACE is happy to help customers in explaining the issue and in selecting the best option for them.