Utahns face another hefty rise in natural gas prices this winter

Rates could be 35% higher than two years ago if PSC approves Dominion Energy’s rate requests.

(Francisco Kjolseth | The Salt Lake Tribune) Construction workers are replacing a Dominion Energy gas line along 200 South near Lincoln Street in Salt Lake City on Tuesday, Oct. 25, 2022. Dominion has applied for a rate increase that, among other things, would go to replacing aging infrastructure.

Utahns who heat their homes with natural gas should brace for another jump in their monthly bills this winter.

Dominion Energy, which supplies natural gas to about 80 percent of Utah homes, has applied to the Utah Public Service Commission for two rate increases – one starting Nov. 1 and another Jan. 1.

Utah customers could be paying 35% more for gas service than two years ago. The PSC, which sets prices and profits for Utah’s privately owned utilities, is reviewing the requests and will rule soon.

“We view any cost increase as lamentable and work hard to keep our costs as low as possible without sacrificing safety and reliability,” said Jorgan Stakerhofeling, spokesperson for Dominion. “As a result, our proposed cost increases are well below expected cost increases throughout the country.”

The first rate request is what is called a “pass-through” increase. These are adjustments made because Dominion is paying more for gas and passing through the higher cost to its customers as allowed by state law.

In this case, Dominion has asked for a $128-million rate increase, which works out to be an additional $78.16 per year for an average home that consumes 70 decatherms annually — that is a 10.76% increase over the current rate.

Stakerhofeling said many factors determine gas prices, including the war in Ukraine, which has tightened gas supplies worldwide. She also cited “robust” U.S. natural gas demand, which has outstripped supply and reduced storage reserves.

Because of volatility in energy markets, pass-through requests happen as often as twice a year. The Utah Division of Public Utilities, which regulates utilities and advises the PSC on rates, has signed off on the increase, which is subject to a later audit and adjustment if needed.

(Ilvy Njiokiktjien | The New York Times) A liquefied natural gas terminal, and power plant beyond, at the Eemshaven port in the Netherlands in September. Dominion said many factors determine gas prices, including the war in Ukraine, which has tightened energy supplies worldwide

The Utah Office of Consumer Services, which is charged with advocating for ratepayers in rate cases, did not find any basis to oppose the pass-through increase, said Michele Beck, office director. PSC approval is expected before the rate would kick in on Nov. 1.

Earlier this year Dominion also applied for a $70 million increase as part of a general rate case, which happens every three years. Utilities apply for general rate increases to cover higher costs of labor, equipment and other overhead, including replacing aging infrastructure.

“There are a lot of inflationary pressures on labor, materials and equipment,” Beck said.

That second application still is working its way through the PSC, and it is not guaranteed that Dominion will get the full amount. But if Dominion succeeds, it will mean gas bills will jump about 16% this winter. And that’s after an increase of almost 20% last winter.

One key issue in the general case is what is called the allowed rate of return. This is essentially the profit Dominion is allowed to make. Dominion is seeking a rate of return that is above 10%, but Beck’s office and others have argued it should be below 10%.

Where the PSC sets the rate of return will largely determine the size of the general rate increase. The PSC will hold hearings in mid-November and will rule before the first of the year.

The increases come after years of steady rates. Stakerhofeling said for the decade prior to 2021, increases averaged 0.8% annually. And Utahns still pay less for natural gas than most of the country.

“The U.S. Energy Information Administration projects that the average U.S. household will spend 28% more on gas utility bills this winter than last winter, which is materially more than what Utah customers should expect inclusive of both our fuel filing and general rate case,” Stakerhofeling said.

She also raised the possibility of the company coming back for a rate reduction next year, given that gas prices are expected to drop in the spring. The last time the company received a pass-through rate reduction was in June 2020, when rates dropped 1.27%. But it was short-lived. The next pass-through adjustment the following November was a 4.45% increase.

For people with low incomes who are struggling to pay their heat bills, Dominion has a program to help. In 2021, 16,623 Dominion customers received $4.4 million in reductions of their gas bills. Those interested in applying for help can call 211, or Dominion at 800-323-5517 or go to Dominion’s energy assistance website.

While it is more climate-friendly than coal or fuel oil, natural gas is still a fossil fuel that contributes to warming the planet when it is burned. Dominion earlier this year started a carbon offset program that allows its 1 million Utah customers to voluntarily buy credits to offset the carbon emissions they generate. Those funds go to methane-capture projects. One such project at the Trans-Jordan landfill traps methane from decaying garbage and uses it to generate electricity. Dominion recently announced that 1,000 customers have signed up.

Dominion, which also has gas and electric customers in other states, has pledged to have net-zero carbon emissions by 2050.