The state Public Service Commission offered heartening news to cash-strapped consumers on Friday. Based on data submitted by the state's natural gas companies, the average resident can expect to pay nearly 40 percent less on their bills this winter compared to last.
Behind the decrease is a sharp drop in the wholesale price of natural gas that PSC Chairman David Armstrong said was "artificially high" last year due to what many consider to have been speculative investing in the commodity.
The PSC noted wholesale prices, which make up the largest portion of natural gas bills, are now at their lowest levels in six years. Also, the amount of natural gas placed in storage for use this winter is at historically high levels, according to the federal Energy Information Administration.
The state's five major natural gas companies expect their adjusted wholesale cost this November to be $5.61 per thousand cubic feet (Mcf). That's down 52 percent, or $6.09, from an average of $11.70 a year ago.
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In August of last year, the wholesale cost peaked at $15.17 per Mcf.
The wholesale cost of gas accounts for the majority of bills and a typical residential customer using 10 Mcf next month will pay a total bill of $92.08, down 39 percent from $150.78 a year ago.
"Lower energy prices do not negate the wisdom of taking steps that will reduce energy consumption in the long term," Armstrong said. "Consumers would be wise to turn some of their immediate savings into permanent investments in weatherization and other measures that will pay off in coming years."
The PSC cautioned, though, that natural gas customers on budget plans will not see as dramatic a drop in their bills.
"The whole idea of the budget billing is to take the fluctuations out to the greatest extent possible, so because of that, you won't see the kinds of swing as people who aren't on those plans," PSC spokesman Andrew Melnykovych said.
But the bills will be lower. "If they haven't seen a downward adjustment in the budget billing yet, there will be one forthcoming," he said.
Bills will also be lower despite a recent hike in rates for Columbia Gas. The PSC this week approved an increase for the utility that will see residential customers pay $3.05 more in monthly customer charges, an increase from $9.30 to $12.35.
Charges to customers and delivery fees make up less than half of natural gas bills, but are where utilities make their profits. The majority is the cost of the gas itself, which, by law, is not allowed to be marked up.
About 44 percent of Kentuckians use natural gas to heat their homes. Those who heat with propane (10 percent) and fuel oil (3 percent) also will see lower costs.
The 39 percent of the state that uses electric heat are expected to see relatively little change in bills, the PSC said. The cost of coal, which is used to generate more than 90 percent of the state's electricity, has fluctuated less than other fuels.