Dalton Utilities will add a fuel cost adjustment for electricity; may not affect residential customers | Local News

Dalton Utilities CEO Tom Bundros told members of the utility’s board of directors Friday that a “perfect storm” of events has driven natural gas prices higher over the past 10 days.

Bundros said that historically, the price of natural gas at the Henry Hub distribution center in Louisiana has followed the Transco Zone 4 pipeline, which serves the East Coast. But he said so far in July, Transco’s average price was nearly $3 higher per dekatherm (a unit of energy used to meter natural gas).

“Yesterday the difference was between $5 and $6,” he said. “What does that mean? Well, Transco Zone 4 is the natural gas price proxy that underpins our wholesale electricity purchases, which now account for nearly two-thirds of the electricity we receive for resale to our customers.

Bundros said that without quick action, the utility was looking at “a $1.5 million to $2 million margin loss in July alone.”

The board voted 4-0 to add a fuel cost adjustment to power bills that will be based on the average daily differential between the Transco Zone 4 pipeline price and the Henry Hub price over the past 30 days.

“We live in a time like none of us have ever seen before,” said board chairman Joe Yarbrough. “It is a unique and historic period. Nobody likes what we had to do, but at the end of the day, we can’t absorb those kinds of operating losses and be a viable entity.

Bundros said several factors are conspiring to drive up natural gas prices.

“You have a super hot summer which increases the demand for electricity,” he said. “Environmental regulations are shutting down coal-fired power plants in this country, so an ever-increasing share of electricity comes from natural gas. And because of some lawsuits, the extra pipeline capacity that needed to be built to get to the east coast has been wiped out, to put it simply, we have limited capacity and increased demand.

Bundros said the impact on residential customers was unclear.

“The FCA (fuel cost adjustment) is not done for residential customers on a monthly basis, it is done on a quarterly basis,” he said. “They won’t see anything until October. Hopefully we get lucky and the weather gets cooler, and they won’t see any impact from that pipeline differential.

Eleanor C. William