by Carrie Moritz, Gazette
Natural gas prices are predicted to be very high this winter. In some places in South Dakota, customer bills are expected to rise 50-100% of last winter's normal prices, leaving many people wondering how they'll manage to stay warm this cold season.
In October 2020, the City of Garretson switched to a new natural gas provider named Clayton Energy, and the timing was fortuitous. This was because, as part of the switchover, Clayton Energy locked in 70% of Garretson's normal winter gas usage costs.
At the time, locking in 70% of normal usage seemed like a good idea. Ordering "too much" natural gas would mean the city has to sell the overage back at market rates, which could be substantially lower than it had been purchased at. It was believed that few colder-than-usual days wouldn't raise the price much more than a few cents per Ccf for Garretson customers.
There are several different units of measurement for natural gas. The City charges per Ccf, Clayton Energy charges per decatherm (DT), and the Public Utilities Commission uses the unit MMBtu. According to the U.S. Energy Information Administration, 100 cubic feet (Ccf) of natural gas equals 103,700 Btu, or 1.037 therms. One thousand cubic feet (Mcf) of natural gas equals 1.037 MMBtu, or 10.37 therms (a decatherm).
Garretson's 70% was estimated at 243 decatherms, and that amount was locked in at $3.51 per DT.
In February of this year, the power and natural gas grids experienced a record-breaking freeze in southern states, putting a strain on the entire system and creating a domino effect. Rolling blackouts and natural gas market rates more than 8x the usual became the norm for five days, leaving suppliers and customers reeling.
Since Garretson had locked in 70% of its normal usage, it had to pay market rates for the the overage. Unfortunately, a perfect storm of a long weekend combined with negative 20-degree Fahrenheit temperatures made for plenty of extra usage in that time, causing natural gas bills that nearly tripled for Garretson residents. In those five days, residents used 629 DT, leaving 389 decatherms that had to be paid at market rates of $203 per DT.
Despite the financial pain, residents were grateful they didn't have to pay the entirety of what could have been thousand-dollar-extra utility bills because of the locked in rate.
"I am certain, that if we had stayed with our old energy company, that we would have been towards the higher end of those prices," said Mayor Greg Beaner at the time.
"Those prices" meant upwards of $400 per decatherm.
After the steep price hike, market rates began dropping back towards normal again, and Clayton Energy's President, Bill Lindley, asked all of the communities the company supplies if they'd like to move to a 100%-of-normal-usage plan.
The City Council voted yes, and Lindley began working to hedge pricing, waiting for normal market rates to take over.
"Normal" never came.
"We have been trying to buy additional supplies for this upcoming winter, but prices have been elevated for most of the summer and have kept us from doing so," Lindley wrote to the City in September. "They continue to be elevated and are currently in the $5.00-$6.00 range, a price we haven't seen in many years."
Much of the reason behind the cost lies not only behind the repercussions from the power failure earlier this year, but also in the majority of liquid natural gas suppliers' willingness to sell overseas, where Europe and Asia are commanding much higher profit margins due to a shortage on their end. Lindley also pointed out that coal retirements are driving demand for natural gas in the U.S.
“Over the last several years, natural gas customers have benefitted from low gas prices, so this year’s prices may come with sticker shock. South Dakota natural gas utilities are estimating natural gas prices for this upcoming winter will near $6 per Metric Million British Thermal Unit (MMBtu), compared to prices usually in the $2 to $3 per MMBtu range last year. The higher-than-normal natural gas prices anticipated this winter, combined with the residual effects of the unprecedented natural gas prices experienced in February 2021 that utilities are currently continuing to recover from customers, will result in winter bills at levels not seen in well over 10 years,” commented South Dakota PUC Vice Chairperson Kristie Fiegen.
This means Lindley has his work cut out for him in locking in the final 30%, which as of press time on Tuesday, had not yet been done.
“These estimated increases are only projections. Actual bill impacts may end up being higher or lower than what utilities are projecting. Regardless, South Dakota customers should prepare for higher bills by planning ahead and taking steps to manage their budgets and these costs now,” said PUC Commissioner Gary Hanson. “Completing a home energy audit is a good way to determine where your home is losing energy and identify what fixes or upgrades are worth the investment. Some utility companies offer a professional assessment to customers free of charge, so contact your local utility to find out more and while you have them on the phone, ask about a budget billing plan that helps spread out higher utility costs over several months rather than having to pay them all at once,” he continued.
The City of Garretson offered a payment plan to customers this past spring, allowing residents to spread out the cost from February's price hike. Further payment plans have not yet been discussed by the council; however, Garretson is not predicted to see their costs increase quite as substantially.
This does not mean they won't go up. The price was already higher at October's city council meeting, where City Finance Officer Anna Uhl quoted $1.0271 per Ccf. July's price was $.8852 per ccf, August was $.9656 per ccf, and September was $.9968 per ccf.
Other ways the PUC suggests to lower natural gas and electric consumption include setting your thermostat to a lower temperature, installing a programmable thermostat, maintaining and upgrading appliances for greater energy efficiency, changing furnace filters, and conserving hot water.
Most of all, however, Garretson natural gas customers can be grateful their costs won't be quite as painful as some of their neighbors'.
