National Grids weather adjustment policy for natural gas users has puzzled residents this winter, as they have had to pay adjustment for weather charges despite using historically low amounts of gas to heat their homes.
The policy attempts to even out the amount of money National Grid loses during unusually mild winters by charging customers to make up the difference, using a 30-year average weather forecast as a measuring stick to do so. By contrast, customers are reimbursed when temperatures are lower than normal and they use greater amounts of gas to heat their homes. National Grid makes these adjustments during its six-month winter season from November through March.
The policy was originally started by National Grid in the 1970s following several unusually cold winters in New York State in which customers used high amounts of gas, said Anne V. Dalton, spokeswoman for the state Public Service Commission, which oversaw the establishment of the policy.
There were very cold winters and the utilities were making a lot of money, so the policy came about because they were bringing in more money than they needed to deliver services, Ms. Dalton said. So the idea with coming up with the weather normalization calculation was to have a mechanism available that also protects the company at the same time for when they arent drawing enough revenue during mild winters.
This winter, adjustment fees for customers were much higher than usual because temperatures were an average 20-percent higher than normal, Ms. Dalton said.
Weather adjustment rates for customers vary based on the amount of gas they use, Ms. Dalton said. To help evenly distribute the amount each customer pays, households that use less gas than other users are charged more based on the amount of decatherms they use.
For instance, if National Grid needs households to use an average of 100 decatherms of natural gas during the winter season to pay for its operational costs, it charges customers who use less gas more to help equalize the amount they pay. So while customers who use more gas still have much higher bills, their weather adjustment fees are less because they are already paying more money for delivery services.
Ms. Dalton said the system is designed to ensure everyone chips in a fair amount to maintain delivery services.
Customers who are paying a higher delivery charge are subsidizing lower-volume customers to an extent, which is why they are charged more to make up for it, she said.
Even with the higher weather adjustment rates this winter, customers gas bills were still at historic lows because of low usage levels and the relatively low price of natural gas, said Cynthia H. McCarran, PSC chief of gas policy and supply. National Grid purchases 60-percent of its natural gas before the winter season by November and buys the rest throughout the winter season. Prices were in the $5 per 1,000 cubic feet range this fall, but they dipped to about $2 by the end of the winter season in March.
Going into the winter, our analysis indicated that gas bills were going to be lower than 10-percent compared to last winter, and they were even higher, Ms. McCarran said. I think that customers are noticing the (weather charge) more now because their commodity prices were so low. Theyre not used to paying bills this low, but they see the extra (weather) charge and dont know what it means.
Theoretically, the weather-adjustment charges customers pay during mild winters should be offset over the long-term by reimbursements they receive during unusually cold winters, Ms. McCarran said. When weather is colder than the 30-year forecast, customers are reimbursed money based on amount of decatherms of natural gas they purchase.
Rate payers will still always save money based on the amount of gas they dont use, but these are a way to ensure the provider doesnt go bankrupt, she said.
National Grid also offers a budget billing program that establishes a fixed monthly rate for customers during the year, which is calculated based on an average commodity price and an estimation of households gas usage.
Under that plan, customers are either charged or reimbursed at the end of the year based on their actual usage and the weather-adjustment formula.
Customers who have questions about their gas bills from National Grid are encouraged to call the Public Service Commission at 1-800-342-3377.