LOCAL UTILITY BILLS
WILL REFLECT WHOLESALE
COST CONDITIONS IN POWER AND GAS

ATHENS, Tenn. - With today’s wholesale natural gas prices triple what they were in the late 1990s, Athens Utilities Board (AUB) is feeling the financial impact and wants its customers to be fully aware of how they may be affected. Moreover, TVA has announced a rate adjustment for this fall, which also will impact end-user bills.

“The bottom line is that AUB, as an energy distributor, is and will be paying more for the natural gas and electric power that it purchases for resale to our customers,” said AUB spokesman Wayne Scarbrough.

“As reported recently in the Daily Post Athenian, our natural gas revenues are $1 million below what they were this time last year. This stems from a combination of wholesale prices doubling since April 2002, and our honoring a pledge to customers to reduce our rate last spring. We did so by about ten percent and have absorbed the losses via capital reserves. We do all we can to keep our customers’ costs down, but we clearly cannot continue to absorb losses indefinitely,” Scarbrough said.

A new AUB rate structure set to go into effect July 1 will help distribute the utility’s costs more equitably among various customer classes, said Bob Ingram, AUB’s superintendent for natural gas. It will also help the utility maintain a healthy fiscal operation while minimizing wide swings in retail costs.

“The new rate system will have two components,” Natural Gas Superintendent Bob Ingram explained. “Part of the monthly rate will be an amount 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,” Ingram said.

The other portion of the rate-called the PGA, for purchased gas adjustment-will fluctuate slightly based on what AUB has to pay for gas, Ingram said. “This portion of the rate will be calculated monthly based on the previous 12-month average.”

Scarbrough warned that customer gas bills are likely to rise, but hopes customers will realize that an increase will not necessarily be the result of the new rate system.

“Whether on our new system or the old one, it is a matter of what AUB has to pay the pipeline for wholesale gas,” he said. “In the 1990s we paid about $2 per decatherm. This month our cost for the same amount is about $6. In March, it peaked at more than $9 per decatherm.”

On the national scene, some industry analysts say that circumstances surrounding natural gas supply and demand could make for the nation's next energy crunch. Demand has risen sharply since the mid-1990s, driven largely by colder winters and the increased use of natural gas to fire turbines at electric-power generating facilities. The natural gas supply, meanwhile, has remained flat, at about 19 trillion cubic feet annually since 1994. Total domestic use in 2001 was 22 trillion cubic feet, a level that holds today.

Last month, Federal Reserve Chairman Alan Greenspan called attention to the problem in his testimony before Congress.

“I’m quite surprised at how little attention the natural gas problem has been getting,” Greenspan said. He went on to describe the issue as “very serious.”

From an electric power perspective, customer bills will be impacted by a TVA wholesale rate increase planned to go into effect in October.

“By all measures, we in the Tennessee valley still have low rates compared to most of the country,” Scarbrough said. “AUB’s power rates have not changed for six years while the cost of doing business has risen annually. Again, economics dictate that power rates must rise at some point to meet rising operating costs.”

Scarbrough said that the amount of the power rate increase is not yet known because TVA’s plan has not been detailed to distributors. “We expect to know something next month,” he said.

Scarbrough said AUB is communicating publicly now to try to inform customers openly and with facts. “We want customers to know the ‘what’ and ‘why’ regarding the amount of their bill.”

AUB encourages customers to call the utility at 745-4501 to get answers to questions about this or any other AUB-related issue, including energy conservation methods that can help control monthly costs.