by Mayor Greg Beaner
The community of Garretson is unique in many ways. One of those ways is that we have a municipally owned natural gas system. There are 4 towns in SD that own natural gas systems: Watertown, Humboldt, Crooks, and Garretson. The city council has recently voted to make a change to our system.
The history of our gas system is pretty interesting. I will try to be as accurate as possible in explaining the history and how things work. In the early 90’s the Northern Natural Gas line was extended into South Dakota. Communities were offered the chance to tap into the line to start their own natural gas systems. In Iowa there are a lot of cities that took this opportunity but only a few in SD. Since the tap into the pipeline was so expensive, Crooks, Humboldt and Garretson shared the cost of the tap. Crooks and Garretson also shared the cost of a pipeline to transport the gas. We were paying a flat fee to Crooks but Mayor Tim Mullin worked out a resolution with Crooks to pay only for the amount of gas that we actually transport through this line. We will be making our final payment on the gas line construction cost this year.
If you have ever read the city council meeting minutes you will notice that there is always a resolution for the natural gas prices. The city council currently acts as the natural gas board. Some communities, like Humboldt, have an independent board that makes decisions for the community. I like the way that our system and operations have been set up. With our council acting as the board, it seems easier to make informed decisions when questions come up.
The city has money set aside for emergency repairs and other unplanned expenses. This contingency fund is required by the initial contract. For several years the natural gas system was operating at a loss. The finance officer, at that time, created a formula that would allow the enterprise to break even. The price we charge pretty much pays for the maintenance, loan payment and the cost of the gas that we use. The cost of maintenance and the loan payment do not change. The cost of gas fluctuates with the market costs and our current gas is purchased through CenterPoint Energy.
We haven’t received much assistance from CenterPoint when we purchase natural gas. We have tried purchasing a larger amount of gas at a reduced price. The intention of this was good but when we didn’t use the entire amount we were fined because it had to be sold back. It is incredibly complicated to predict the amount of gas that we will need. Summers are easy but winter’s gas needs really depend on growth and the weather. Natural gas prices also change with things like production, demand, and even hurricanes. Unfortunately, at times, we have been at the mercy of the market price because we didn’t lock in a large enough “winter strip” and the winter was extremely cold.
We met with the Mayor and utility director of Crooks to discuss our natural gas systems. They explained that they were leaving CenterPoint Energy and moving to a company called Clayton Energy. This company was recommended to them as very reputable. Clayton Energy met with the utility directors from Crooks, Humboldt and Garretson and then met with the city council for contract negotiations.
At the March city council meeting, the council voted to sign a contract with Clayton Energy as our contract with CenterPoint was expiring in April. We are signing a 2 year contract instead of the typical 5 year contract. This shorter term will allow us to trial their services. Crooks is also committing to a 2 year contract and Humboldt is discussing the possibility.
We chose Clayton Energy for several reasons but I feel the biggest reason is price. Clayton Energy charges about the same price as CenterPoint. Clayton Energy works for approximately 200 cities and their only job is purchasing natural gas for those cities. Clayton Energy purchases large quantities of gas on behalf of cities and gets a discount for purchasing it in bulk. They purchase the gas like a commodity and part of it is even purchased years out. By diversifying the portfolio of our natural gas we will be able to get gas at a stable and lower price and this can be passed on to the customers.The representative from Clayton Energy gave us a list of references to check before we chose them. I actually called some of the other cities that use Clayton Energy that were not on the reference list. I was truly impressed by the positive responses that people had. We also checked with other cities about the billing operations of Clayton Energy. I think that this will be a good change for our community’s system. Please feel free to email me if you have any questions. My email is . Thank you and I hope everyone has a great March.
