Hedging Keeps DU Gas Rates Stable
Increase in global demand, the current political pressure on fossil fuels and the Russia/Ukraine conflict have resulted in extremely high natural gas prices over the past 12 months. Customers will remember the steep increases in power costs from this past summer, largely blamed on higher natural gas prices. Those same market forces could cause higher heating bills for Decatur Utilities gas customers. However, DU’s “hedging” of its natural gas supply has kept retail gas rates for DU customers much more stable.
“For many years, DU has strategically purchased future volumes of natural gas, especially those volumes needed for usage during winter months,” said Gary Borden, DU Operations Manager. “By making these bulk purchases when prices are lower, we are able to minimize the impact of market volatility like we’ve seen over the past couple of years.”
For example, DU purchased approximately 80% of its projected natural gas needs for the 2022-2023 winter season at an average price of $2.84/dekatherm (Or One Million BTU). The index price of natural gas peaked at $12.44/dekatherm in August 2022 before dropping slightly to $7.10 in October.
Had DU not made those future natural gas purchases at lower wholesale prices, DU customers would have seen a dramatic increase in retail rates. In fact, the U.S. Energy Information Administration is projecting a 28%* increase in heating costs for most natural gas customers as compared to last year’s winter heating season.
“DU is fortunate to have an in-house expert purchasing gas on behalf of our customers,” said Ray Hardin, DU General Manager. “Gary and Debra Curtis, DU’s Energy Analyst, continuously monitor the gas markets to make purchases for future needs. This winter, we will see the benefits of purchase decisions that were made over the past 2 years. In fact, DU’s hedging efforts have purchased and locked in a large portion of natural gas for its customers through Fiscal Year 2026.”
“This is one of the ways a public-owned utility works for the customer each day. We are not trying to produce a dividend for stockholders, but working for the customer,” Borden said. “This hedging program is just one of the ways we strive to make sure our rates are kept as low as possible for everyone.”