NEW AUB GAS RATE STRUCTURE
AIMED AT COST RECOVER, NOT PROFIT

ATHENS, Tenn. - With recent announcements that Athens Utilities Board (AUB) this summer will institute a new rate structure for natural gas, some customers are making the assumption that AUB simply wants to raise rates to make money and that rates will rise rapidly, according to AUB spokesman Wayne Scarbrough.

Not so, Scarbrough said.

“AUB is a not-for-profit public utility, the community’s utility. We must minimize losses to maintain a healthy business. Our customers deserve to know that we soundly operate the business, recovering our business costs as opposed to putting operations in jeopardy through losses,” he said. “Yesterday’s rate structures will not equitably recover costs in today’s wholesale environment.”

Scarbrough said the rate-hike assumption among customers is understandable. “I guess it is human nature to assume the worst. But this is not an across-the-board rate increase for the sake of making money. It is all tied to the cost of wholesale gas, over which AUB has no control.׏

“We need the new rate structure to ensure that we can adequately cover our wholesale cost for gas and to see that various customer types pay no more or no less than they should based on their demand for gas,” he said.

Currently, the AUB gas rate is a single number of 81 cents per one hundred cubic feet of gas usage. The new rates will have two smaller components that compose the whole, Gas Superintendent Bob Ingram explained.

“Part of the monthly rate will be an amount that is fixed for a year and won’t change during that time. This portion will cover AUB’s fixed costs of operation, such as overhead, budgeted maintenance expenses, and maintenance reserves for emergencies,” Ingram said. The other portion of the monthly rate will fluctuate slightly based on what AUB has to pay for gas.

“The wholesale cost changes every month for us, depending on the market,” Scarbrough said. “Each month when we get our bill from our supplier we’ll calculate what we must charge to recover our gas cost. AUB won’t make or lose money on this variable portion of the monthly rate.”

But simply noting the daily commodity cost of gas at the wholesale level won’t tell the whole story either, Ingram said. That’s because AUB’s rate will take into account the average cost of gas for the preceding 12 months. “This will help shield our ratepayers from large swings in the wholesale market.”

For instance, he explained, AUB’s cost of gas-stated in the decatherm units in which AUB buys gas-doubled in the month of February at the wholesale level, from roughly $4.50 per decatherm to around $9.00 per decatherm.

“When that fact was reported in the paper we began getting calls from customers who assumed that under our proposed rate plan their retail rate would have doubled because the wholesale cost doubled,” Scarbrough said. “But because we would average that month’s cost in with the eleven preceding months, the effect on the retail rate would be minimized. Price fluctuations up or down from month to month should be minimal, not a rollercoaster of wide swings up or down,” he said.

Another feature of AUB’s proposed new rate structure will key on a customer’s usage of gas during the year.

“There will be two residential rate classes,” Scarbrough said. “One for customers who use gas only part of the year, such as for winter heating, and a second rate class for year-round users, such as households with gas water heating.” Year-round users will get a slightly discounted rate.

“The reason for discounting the rate for year-round users is that they share more of the utility’s year-round cost,” Scarbrough said. “When AUB buys gas from a wholesaler we have to pay 12 months of pipeline capacity. That’s just the way it works. Therefore, a customer who uses gas only three months of the year does not share in the twelve-month transportation charge the way a year-round user does.”

“I don’t think customers will see a notable difference from what they are paying now. What has driven higher bills in the past three months has been increased energy usage due to cold weather. Whether you use gas or electric, you saw higher bills in the first quarter of this year because it took more energy to maintain a comfort level.”

AUB encourages customers to call the utility at 745-4501 to get answers to questions about this or any other AUB-related issue.