This one is for you, David Zetland!
Interesting stuff going on with our natural gas utility, Enstar. These excerpts are from a news report earlier in September:
Southcentral Alaskans can expect a significant reduction in their heating bills starting in January … at this point it looks like the percentage drop could be “double-digit,” said John Sims, spokesman for the Anchorage company.
Enstar purchases its gas from Cook Inlet area producers and the price it pays is based on oil and natural gas price indexes in the Lower 48. As allowed by regulators, the utility passes that cost along to its customers, adjusting its rates for the cost of gas once per year.
Oil and gas prices started rising dramatically earlier this decade, with oil hitting historic highs last year.
This year, Enstar raised its overall rates 22 percent. In 2008, it lowered its rates 2 percent. In 2007, it raised them by 30 percent. Rates have more than doubled since 2004.
After 2007’s big rate increase, a survey of AARP’s Alaska members showed that nearly half of them reacted to the rate increase by “substantially” lowering the temperature in their homes, Secrest said.
The increases were “a difficult hit to take. It really hits customers where it hurts,” Sims said.
This year, the average prices of oil and gas have plunged amid the sharp Lower 48 recession.
Enstar isn’t the only utility reducing its rates because of oil and gas price declines.
Chugach Electric Association, which unlike Enstar, adjusts its rates quarterly, reduced its rates by 11 percent in July and has proposed an additional 4.5 percent decrease for the final three months of 2009.
The electric company uses natural gas to produce most of the power it sells to its Southcentral electricity customers.
I will ignore the other recent Enstar news that some of that last rate hike was trying to make us customers pay for a very large billing mistake Enstar made with a military Laundry.
But on the heels of the rate decrease, we get this news story today (edited of the boring bits for this post)!:
City unveils plan to reduce winter gas use
Cold showers, chilly living rooms and microwaved cuisine could be in store for Southcentral residents this winter as local utilities and government leaders search for ways to conserve natural gas.
Under the new scheme, city officials, working with the utilities, created a three-tiered alert system advising consumers how they should help conserve fuel to cut back demand in cases where the system faces an overload.
Last winter, the gas distribution system on several occasions nearly reached its limit. Utility leaders say the problem isn’t a lack of gas, it’s keeping the lines pressurized during the periods when demand is at its highest.
Here’s the new system’s color-coded advisory setup, which asks more and more of consumers as conditions worsen:
• Green: Normal operation. Residents are asked to “use energy wisely.”
• Yellow: Residents are urged to set living-area thermostats at 65 degrees; 40 degrees in garages. They are asked to lower water heater settings to “warm.”
• Red: Thermostats should be set to 60 degrees in living areas and water heater gas valves set to “pilot.” Household activities should be consolidated into as few rooms as possible and people should use the microwave for cooking.
Sullivan said there will be a test of the system Oct. 21 from 6-8 p.m., in which consumers will be asked “to curtail energy use” under the terms of code yellow to see how much power is saved.
At the press conference, Sullivan said officials plan to launch an advertising campaign urging people to adjust their habits if needed, though he acknowledged there was no way to force people to comply. However, executives from Enstar Natural Gas Co. and Chugach Electric Association said their customers are willing to make sacrifices.
“We’ve actually done surveys to answer that question,” said Chugach chief executive Bradley Evans. “Generally speaking, we had about a 70-80 percent reaction that said that they would do voluntary action to reduce the load.”
Bob Pickett, chairman of the Regulatory Commission of Alaska, said he thought creating the plan and getting the public on board was “a very responsible effort” that could help avert a potential crisis in the darkest, coldest months.
“I think it’s fair to say that the deliverability issues are real and this has been a situation that’s been a long time in the making, a lot of reasons for it,” he said. “This is real and the actions of conservation on a short-term emergency basis could actually prevent the problem from happening.”
The gas fields in Cook Inlet have long supplied the demand, Sullivan said, but as gas has been extracted the reserves and pressure have declined. And dropping pressure means less gas can move through the lines.
To keep it flowing, the utilities have added compressors to give the gas a push into the Enstar system, ML&P general manager James Posey said. But if a compressor fails, as happened several times last winter, supply might not be able to keep up with demand.
In a worst-case scenario, which Sullivan said was unlikely to happen, utilities could implement rolling blackouts around town lasting from 20 to 30 minutes for residences and gas curtailments for commercial accounts.
This is ludicrous! The first article points out that with high prices, people were using less gas. Now we are getting lower prices and being asked to use less gas! Go read David’s blog on utilities (specifically water) and economics – Aguanomics – if you don’t get why. The incentive to lower the thermostat and put in more insulation is higher prices!! Under the above system, I get penalized for spending eight grand insulating my foundation – I still am morally required (but in no other way) to keep my house at 60 degrees if things get tight, even though I’m using much less gas than average to heat anyway. Hmmm…however, if the heat does get forcibly turned off for a while, my place will stay a lot toastier than those ritzy houses with the high cathedral ceiling and all the glass!
Bottom line: Enstar should not lower rates – they should charge more for natural gas, in a tiered manner (some gas for little, more for $$). Excess profits should be divvied up equally and refunded to customers.