CUB’s Persistence Leads to Increased Bill Credit for NW Natural Customers
Posted on May 4, 2020 by Will Gehrke
Tags, Energy
During the month of June, NW Natural residential customers will receive a $16.88 (average) bill credit due to ratepayer owned natural gas storage. In this blog, we will provide background on natural gas storage and why it is valuable to the region and profitable for NW Natural’s customers, and how CUB’s advocacy led to an increase in this bill credit.
How is natural gas transported to Oregonians?
Natural gas is a commodity that is transported across large interstate pipelines to meet energy needs. Local distribution companies such as NW Natural, Avista, and Cascade distribute natural gas, which is brought to their service territory on these pipelines. Portland General Electric and Pacific Power also rely on interstate pipelines to serve as fuel for electricity generation. Unlike electricity where electrons instantly move to load, natural gas needs to be pressurized to flow through the pipeline in order to meet customer demand.
The demand for natural gas is highly seasonal. Residential customers predominately use natural gas for space heating during the fall and winter. During a cold weather event, demand increases to heat homes and buildings. Demand also increases in the summer, when electric utilities use natural gas generation to meet summer load.
What is natural gas storage and why is it important to Oregonians?
Conventional gas storage facilities are typically depleted natural gas reservoirs or underground aquifers. It is extremely expensive to construct large scale natural gas storage facilities. In the Pacific Northwest, there are only two large scale storage facilities. One, Mist Storage, is owned by NW Natural. Due to the scarcity of natural gas storage in the region, the Mist facility is extremely valuable to NW Natural’s customers.
The storage facility allows NW Natural to store gas in the spring and fall when prices are low. During cold weather events, the company can avoid purchasing expensive natural gas and incurring interstate pipeline costs by using the stored supply. Mist allows NW Natural to seasonally sell and buy gas for the benefit of its customers. This process is known as natural gas storage optimization. All other factors being equal, during periods of volatile natural gas prices, the Mist facility will generate more value for customers.
How was CUB involved in the rate credit?
After NW Natural developed Mist, it proposed to use the facility for optimization. It claimed this was a new activity and it deserved to be compensated, and won approval to retain 33 percent of the net revenues from optimization of Mist storage. CUB has been concerned about this because utilities are generally expected to optimize customer-financed assets for the benefit of customers. Electric utilities, for example, sell surplus power into the market and use the revenue to reduce electric rates. In the 2013 general rate case, CUB believed that too much revenue was being retained by shareholders and this was an inappropriate use of a ratepayer asset. The company disagreed with CUB and the issue was litigated before the Public Utility Commission (PUC), which then ordered a third-party review.
Months went by and CUB had to remind the PUC and NW Natural that an independent review of optimization was required. It took five years of CUB pushing to get this review done, but it was completed in 2017. In the 2018 general rate case, the resulting study, known as the “Liberty Report” was presented to the PUC. The Liberty Report agreed with CUB that NW Natural’s share of storage revenue was overly generous compared to the natural gas industry standards, and recommended that more money be passed to customers. Based on the Liberty Report, CUB recommended that 90 percent of the revenues from optimization of customer assets should be provided to customers, and the PUC agreed. In total, it took seven years to correct the amount of revenue passed back to customers.
This case demonstrates the lasting value of having a persistent consumer advocate for utility customers - it takes dedication and professional expertise to successfully represent customers on complex issues.
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05/04/20 | 1 Comment | CUB’s Persistence Leads to Increased Bill Credit for NW Natural Customers