Renters and homeowners in Southwest Colorado watching rising inflation and gasoline prices will be greeted by another unwelcome sight next month: higher natural gas bills.
Atmos Energy Corp. issued a notice earlier this month that gas rates will increase in Southwest Colorado next month with residential bills rising 26% and commercial bills 35%. The rate increases come as the coronavirus pandemic and war in Ukraine have spurred volatility in global energy markets and sent natural gas prices climbing.
Average monthly residential gas bills will increase from $59 to $74.60 as residential rates for natural gas surge from 77 cents per 100 cubic feet to $1.02, a 33% climb.
Average monthly commercial gas bills will rise from $238.86 to $322.50 as commercial rates increase from 64 cents to 89 cents per ccf, marking a 40% change.
Atmos Energy services San Miguel, Dolores, Montezuma and La Plata counties. The rate increases will be effective June 1.
Kurtis Paradisa, public affairs manager for Atmos Energy, said in an email to The Durango Herald that the interim gas cost adjustment filed with Colorado Public Utilities Commission was a “pass-through cost” to its customers from its natural gas suppliers.
The gas cost adjustment is a periodic rate adjustment natural gas utilities use to adapt to changing wholesale gas prices. A pass-through cost is the direct cost consumers pay for changes in natural gas prices.
“We do not make a profit on the sale of the commodity (natural gas),” Paradisa said in the email. “Our business is the distribution of natural gas. The reason for the increase has to do with the volatility of the wholesale natural gas market due to supply and demand.”
It was the same word-for-word response Jennifer Altieri, vice president of public affairs for Atmos Energy, gave the Herald in an email in September about rising residential gas bills.
In October 2021, residential gas bills in Southwest Colorado jumped 13% and commercial bills 18% after Atmos Energy, with the oversight of the PUC, raised rates to account for increasing natural gas prices.
Beginning in February, Atmos Energy also added 31 cents per ccf to gas rates in Southwest Colorado as a part of a “extraordinary gas cost recovery rider” meant to reimburse Atmos Energy for unexpectedly high natural gas prices created by winter storm Uri in February 2021 which brought freezing temperatures and snow to Southwest Colorado.
Uri was one of the storms that led to Texas’ winter power crisis.
Over the weekend storm, Atmos Energy reported an increase in natural gas costs of more than $13 million for Colorado, Paradisa said.
The extraordinary gas cost recovery rider will be in effect for Southwest Colorado through January 2023. Atmos Energy estimates it will increase monthly bills by about 4% to 5%.
Natural gas prices in the U.S. have swelled over the last year from less than $3 per metric million British thermal units (MMBtu), which is a measurement of the energy content of natural gas used in finance, in May 2021 to more than $8 per MMBtu this month.
Ian Lange, an associate professor of economics and business at the Colorado School of Mines who specializes in energy and natural resource economics, said a number of forces are working together to create volatile energy market.
In 2018, the U.S. surpassed Russia as the world leader in natural gas production, but Russia still topped natural gas exports in 2021, according to the U.S. Energy Information Administration.
Russia’s unprovoked war in Ukraine has had a number of ramifications, including countries in Europe backing away from Russia’s natural gas exports and leaving a void in the continent’s supply. In 2021, Europe imported 74% of Russia’s natural gas exports, supplying the European Union with 40% of its natural gas.
The Ukraine war’s upsetting of global supply and demand has been a significant contributor to rising natural gas prices in the U.S., Lange said.
“Inflation’s not mattering for natural gas prices. It’s geopolitical uncertainty,” he said.
The continued effects of the pandemic are also compounding the war in Ukraine. The pandemic depressed the supply of natural gas, but as countries have begun to emerge, demand has increased, sending prices upward, he said.
But even before the pandemic and the war in Ukraine, natural gas was set to rise in the U.S. The U.S. has historically had the cheapest natural gas market, and the federal government has permitted a number of export and import terminals for natural gas to allow companies to access higher natural gas prices in other parts of the world, Lange said.
In May, natural gas in Europe was trading above $40 per MMBtu, more than five times prices in the U.S. With more opportunities for export and higher prices abroad being pursued by U.S. natural gas companies, domestic prices were inevitably going to rise, Lange said.
“Some of this is just the prices converging,” he said.
In his email, Paradisa said, “We closely monitor all the factors that affect natural gas prices. Our company is committed to serving our customers with safe, reliable natural gas at the best price available.”
Amid a volatile energy market, Paradisa encouraged Atmos Energy’s customers in Southwest Colorado to also look at their own consumption to help mitigate the effects of rising natural gas prices on their energy bills.
“Actual usage will also have a direct impact on a customer’s natural gas bill, which is why we stress that using energy wisely and making a few household changes can make a big difference on customers (sic) natural gas bills,” Paradisa said.
Paradisa highlighted Atmos Energy’s Budget Billing, which allows customers to distribute costs more evenly over the year.
He also pointed those in need of gas bill assistance to the federal Low-Income Energy Assistance Program and Energy Outreach Colorado’s Sharing the Warmth funds.
Natural gas futures were trading above $8 through February 2023 on the Chicago Mercantile Exchange on Friday afternoon, dipping below $5 in April 2023. Lange said those prices represented investors’ beliefs that the energy market will remain volatile for the next year before a return to normal.
If natural gas futures are any indication, Southwest Colorado’s residents could continue to see higher gas bills into next year.
“If you want natural gas next month, that’s $8.14. If you want natural gas in February 2023, that’s also $8. But if you want natural gas a year from now (in) May 2023, that’s $4.70,” Lange said. “The way I look at it that’s the geopolitical risk.”