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2.22.04 Gas-pricing factors differ Generally, but not always, customers of the Metropolitan Utilities District pay lower monthly bills than Aquila customers. Two primary factors influence bills. About 25 percent to 30 percent of the bill is the amount the utility charges to provide gas. Most of the rest is the cost of the gas itself. If Aquila gets a sufficiently better deal on gas than M.U.D., it can bring the overall bill below M.U.D.'s. This does not happen often, but it did last winter. Aquila and M.U.D. employ different philosophies in gas purchasing. Aquila divides its gas purchases among long-term contracts, spot-market purchases and optioned purchases, said Trent Cozad, vice president of gas supply. An option purchase occurs when Aquila buys the right to buy gas within a certain price range. It is paying for price stability. M.U.D.'s purchasing philosophy is to buy its gas roughly at 50-50 market and long term, said Tom Wurtz, general manager. Natural gas prices are notoriously volatile, and Cozad said Aquila's new purchasing philosophy saves customers the most in volatile markets. Wurtz said the market corrects for itself over time, so he believes that M.U.D.'s heavier reliance on market prices saves customers in the long run. M.U.D., as a public utility, cannot be taxed by local governments, but Aquila can be. Some cities tax Aquila 3 percent to 5 percent, and that tax, called a franchise fee, is passed directly to the customer. To compensate cities for the loss of taxing authority over M.U.D., the state requires M.U.D. to pay communities a 2 percent "in-lieu-of-taxes" fee. This is essentially a tax. Because the M.U.D. tax is limited to 2 percent and some cities charge Aquila 5 percent, there's a possibility for as much as a 3-percentage-point difference in local taxes on Aquila and M.U.D. bills. M.U.D. can more easily phase in rate increases because it does not have to jump the regulatory hurdles that Aquila does. Aquila must submit its rate proposals to the Nebraska Public Service Commission for a lengthy review. A simple vote by M.U.D.'s board suffices. This means that M.U.D. customers may see a couple of smaller increases over several years, while Aquila customers will see one larger increase. Because of the state commission's role, Aquila's rates are subject to a more expert, independent review than are M.U.D.'s. State regulators, with the assistance of outside experts, review Aquila's rate proposals on the state's behalf. And the state designates an expert attorney to review rates on the customer's behalf. This attorney, called the public advocate, also hires his own consultants. The state bills private utilities for the cost of this rate review, a cost that the utilities can pass along to their customers. Private utilities also must underwrite the general cost of state's gas regulatory department. Utilities may pass this cost along in the form of a variable monthly regulatory fee. M.U.D.'s rates are reviewed by a locally elected lay board. While the board lacks independent expertise, it is quite price-sensitive because its members are directly elected by customers. There is no political buffer between the M.U.D. board's actions and the electorate. |
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