8.2.06

Utilities to lock in gas discount
by Nancy Gaarder, Omaha World-Herald

In the face of unprecedented prices for natural gas, Metropolitan Utilities District has scoured its operation to cut the cost of heating bills, coming up with average annual savings of at least $30 per residential customer.

The Omaha utility hopes to shave up to $11 million off annual gas costs through changes in its pipeline, storage and purchasing systems.

The M.U.D. board today unanimously approved a key component of those savings.

M.U.D. will join with other public utilities in the region to form a new entity that will buy natural gas at below-market prices. This is how it will work:

• Like the utilities that are participating, the new entity will be a public agency. As such, it will issue tax-exempt bonds.
• The entity will offer a bond issue of several hundred million dollars, creating a large pool of money that can be used upfront to buy natural gas.
• Because so much money is involved upfront, companies selling natural gas can still make money by agreeing to long-term sales contracts, of 10 to 20 years, at below-market prices.

The contracts do not lock in the price of the gas; they lock in a discount. Gas sellers will be liable for paying off the bonds.

Tom Wurtz, president of M.U.D., said the utility hopes to begin buying gas at below-market prices this fall. This fall's bond issue could hit $400 million, said Jim Knight, vice president of gas operations for M.U.D.

Other utilities that have been in talks with M.U.D. are Nebraska Public Power District, Hastings Utilities, Cedar Falls (Iowa) Utilities and National Public Gas Agency of Lincoln.

The new entity would be called Central Plains Energy Project.

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