Carrie A. Moritz, Garretson Gazette
A discussion about natural gas costs was at the top of last week's city council meeting, as it has been a cause for concern across the United States as geo-political issues impact supply.
A 5-day surge in market prices during a polar vortex in February 2021 wreaked havoc across the United States, and prices have been volatile since.
Garretson's natural gas broker is Clayton Energy, who locked in 75% of the city's normal winter usage at pre-surge prices of $3.75 per decatherm back in 2020.
The council had opted not to lock in 100%, as any leftover natural gas would have to be sold back when market prices could be lower, resulting in a net loss.
Up until 2021, prices had been relatively stable, so it was a solid gamble.
Unfortunately, that left Garretson customers covering 25% of normal usage plus any overage at normal market prices, which caught many unawares when market prices surged to 8 times their normal rates for 5 days. The price jump more than tripled most Garretson customers' bills for that month.
While those prices did eventually come back down, they never settled back to where they had been historically. Much of this was due to a willingness on natural gas suppliers' part to export to Europe, which had higher profit margins. It was especially true as threats of war came about and tensions rose between Europe and Russia, who supplied much of that continent's natural gas.
Prices for natural gas surged again after the invasion of Ukraine, leaving rates around 75% higher than normal for Garretson customers this past summer. For instance, June's rates, which used to be $0.68-$0.75 per ccf during summer months, were $1.33. July was priced at $1.46 per ccf.
(Ccf is the smaller unit of natural gas that the city uses to determine usage for customers. Decatherm is the larger unit measured to the city from the supplier.)
September's natural gas prices for Garretson were $1.38 per ccf and October's will be $1.27 per ccf. In September of 2021, that rate was $0.9968, and in November 2021 it was $1.186.
These increased rates would be a burden if they continued, but Garretson will have the locked in rates for the winter months, helping to alleviate some of the price volatility.
After the 2021 winter surge, the council decided to accept Clayton Energy's offer to also lock in a price for the remaining 25% for the 2021-22 winter strip. Since prices never came down to their historic averages, that remainder was locked in at a higher amount than the initial 75%. While this increased the average bill last winter, it did not go up by the 50-100% that was predicted for other natural gas customers in South Dakota.
Clayton Energy is again looking to lock in that remaining 25%. At a meeting between Clayton Energy President Bill Lindley and city employees last week Wednesday, he stated that while prices have decreased to $8.50 per decatherm from the $11 seen over the summer, he hadn't locked the amount in yet because they were still high.
That said, Lindley was concerned the prices would again start increasing as the colder months approach.
"If we locked it in at $8.50 our weighted average would be $4.94," said council member Dave Bonte at the council meeting.
"With everything going on I can't imagine it's going to get any lower," said Mayor Greg Beaner. "I would rather have that than have prices blowing up over the winter. That's not fair to customers either."
"Bill's in the business and he's sure given us solid advice so far," said council member Greg Franka.
On top of that, the supplier, Northern Natural, is requesting a 121% price increase on the national level, which is likely to drive prices even higher.
The council opted to stay in contact with Lindley and to continue to have him use his best judgement. Further updates were not available as of press time, but the Gazette will continue to cover this issue as information becomes available.
