Natural gas rate hike coming in October’s statement for Jasper residents
The Jasper Utility Service Board announced a rate hike would go into effect on October’s billing statement.
The last hike was in 1995 and a gas rate study was conducted in 2003. At that time the study recommended a 1.5% increase but the Utility Service Board declined to increase rates.
As the economy has become stagnant and industrial gas use dropped off, the fixed rate billing system for the gas began to eat into the bottom line of the gas utility. Residential usage has also fallen. That factor combined with a volume-based system of purchasing gas, has the city gas utility operating with a budgetary shortfall.
In 2010, London Witte was contracted to conduct a gas rate study and it was determined the fixed revenue requirement was $1,693,000 and the shortfall equated to $729,000 (attachment 1). The current rate structure was not creating enough revenue at the current rate schedule and a cost of service study was recommended.
Kerry Heid, an independent rate consultant, was hired to perform the cost of service study recommended by London Witte. The study concluded that Jasper should create five rate classes; Residential (RS), Small General Service (SGS), Medium General Service (MGS), Large General Service (LGS), and Interruptible (Interr).
When the classes were reviewed it was determined that the medium, large, and interruptible classes had been subsidizing the residential and small general service classes for a number of years. The subsidies covered approximately 15% of the cost associated with these two classes.
The study recommended a 12.35% increase in revenue to cover the difference. The 12.35% was spread across the five classes, but due to the subsidies that had occurred towards the Residential and Small General Service classes a larger rate increase was required to equalize the amount paid between the five classes.
The study also stated the city should move to a straight fixed rate variable (see attachment 2). This would replace the antiquated fixed volume system that led to this budgetary problem.
A 19.99% increase will go into effect for the Residential class and a 13.68% increase for the Small General Service class (form 1, right column).
According to Greg Krodel, Gas Commissioner, the rate study was conducted when natural gas cost $6.42 per gallon. Now a gallon is around $4 and this could mean that the rate hike would be less.
He said, “If it’s $4 today and this whole rate study was done on $6.42, then there will be a reduction. . . The actual 19.99% rate increase will be less than that.”
Inversely if there is an increase in gas prices then that percentage could go up.
At this point the residential class should expect to pay approximately $8.42 more per month. All rate increases on the attachments are based on natural gas cost of $6.42
