3.06.07

Gas buy 'a great day for M.U.D.'
by Nancy Gaarder, Omaha World-Herald

A small consortium of Midwestern utilities, of which Metropolitan Utilities District is the largest member, has secured what M.U.D. says is a remarkably low price for natural gas.

M.U.D. estimates it will save $58.3 million over the next 20 years because of its first purchase through the Central Plains Energy Project. A second purchase is planned for November.

The savings comes from the bulk purchase of gas made possible by issuing $529.1 million in tax-exempt bonds.

M.U.D., Hastings (Neb.) Utilities and Cedar Falls (Iowa) Utilities formed Central Plains last year to take advantage of their ability as public utilities to issue tax-exempt bonds. Like the three utilities, Central Plains is a government entity.

M.U.D. and Cedar Falls Utilities will receive gas from this first contract, and Hastings Utilities will join in the next one.

Public utilities nationwide have signed about a dozen such contracts since 2003 when the IRS clarified that this kind of financing is legal.

Jim Knight, vice president of gas operations for M.U.D., said this deal was the best of all the contracts.

"This is a great day for M.U.D.," Knight said.

Even the district's most optimistic projections did not envision the level of savings that will be achieved through these contracts, he said.

The contract locks in a specific discount off the market price of gas, rather than an actual price. M.U.D. will pay 6 cents less per therm (a unit of heat equal to 100,000 British thermal units) than market price, said Mari Matulka, a M.U.D. spokeswoman. Previous contracts secured by other utilities obtained a 4- to 5-cent discount, she said.

M.U.D. secured the better discount because of its creditworthiness and market conditions -- rising natural gas prices and interest rates, according to M.U.D.

Customers of M.U.D. and the other utilities will not be liable for the debt, according to the way the contracts are structured. The companies selling the gas are liable.

The new prices go into effect immediately. Matulka said, depending upon use, the average customer is expected to save $4.58 the first year and $7.60 annually after that.

A customer can calculate his or her savings by multiplying the number of therms used -- which are indicated on monthly bills -- by 6 cents.

Cedar Falls estimates that its customers will save $3.7 million over the next 20 years.

Matulka said this first contract will account for 15 percent of the gas that M.U.D. uses in a typical year. The next one will add another 15 percent.
 
Omaha World-Herald editorial page, March 6, 2007
 
Furthermore…

With the annexation to Omaha comes a substantial cut in water bills for Elkhorn residents. Metropolitan Utilities District noted that water will cost residents 33 percent less. For the average user, the reduction will mean a total annual bill around $200, for a decrease of around $100.
 
Gas bills may go down, too, when M.U.D. successfully negotiates to buy facilities from the private utility now serving the community. The annexation was controversial, but it does have its compensations.

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