[Emailfda] Reduction in Purchased Gas Cost

[Fan Email Distribution List]

>From the City of Richmond, Office of the CAO

A press release was issued today announcing that we're lowering the
Purchased Gas Cost (PGC) rate from $11.85 to $8.95, a 24% reduction. This is
due to the drop we've seen in the commodity pricing for natural gas. 

As I'm sure you know, we are prohibited by law to mark up the commodity cost
to our customers. We, like all gas companies, public and private, must
charge our customer only what we pay for gas with no profit. 

Gas costs have come down a few months ago. The reason there was a delay in
us lowering the PGC was that last winter, natural gas costs began a dramatic
rise in price, peaking in April at about $14. They stayed at that level for
several more months, but we continued to charge a below market price of
$10.75. (We didn't raise our PGC rate until August, 2008). 

Our reason for holding the PGC was that gasoline was around $4.00 a gallon
and Dominion announced an 18% rate increase. We didn't want to add to the
consumer burden of higher commodity costs, hoping the natural gas markets
would drop in price. 

During this time, we ran up a $9 million shortfall between what the utility
paid for gas and what we charged our customers. We had to make this
difference up, hence the delay until now for us to lower the PGC even though
natural gas pricing began declining late last fall.

 

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