The proposed rate this heating season for home customers of Summit Natural Gas of Maine is the lowest since the company began operating in 2013, and is comparable to current average heating oil prices, figures compiled by the Governor’s Energy Office show.
This would seem to be a selling point for Summit, which entered Maine three years ago with the promise of expanding the state’s limited natural gas pipeline network and providing a cleaner, more-affordable alternative to heating oil.
But Summit came under fire last Thursday after it emailed a notice to its customers showing that its residential rate would climb 154 percent starting Oct. 1. The pending increase, however, was calculated off the current, unusually low summer rate, which draws little attention since people don’t heat their homes in the summer.
Angry customers charged the company with operating a “giant scam” and using “bait-and-switch” tactics, prompting a clarifying email from Summit on Friday night, and an acknowledgment from Summit’s top officer that the rate notice could have been handled better.
“We could have communicated things differently,” said CEO and President Kurt Adams, a former Maine Public Utilities Commission chairman.
The episode was another black eye for the Colorado-based gas company, which has struggled to find its footing and has generated some public mistrust through construction-safety problems, regulator fines and management turnover.
The public reaction is understandable, said Lisa Smith, a senior planner at Governor’s Energy Office. Each of Maine’s four gas distribution companies has a different business model and rate-making schedule, so the price homeowners pay depends on where they live, and sometimes, the season.
Local gas distribution companies are regulated by the Maine PUC.
The price of natural gas reflects the changing market cost that gas distribution companies pay for supply. It’s a pass-through and provides no profit for the company. The varying charges are similar to what customers pay for electricity supply on their power bills.
In the case of Summit, the difference between the current, low summer rate and the pending winter rate is especially big. Summit normally adjusts its supply costs once a year. But by gaining approval to cut its rate last spring by 70 percent, it was trying a mid-course correction. Summit was seeking to compensate customers for collecting too much money, a result of slack demand during last winter’s record-warm temperatures.
Summit now is asking the PUC to approve a rate for this heating season of roughly 66 cents per therm. That compares to the current rate of 26 cents per therm. A therm is a heat measurement for natural gas. A gallon of heating oil is equal to roughly 1.5 therms.
Last winter, when gas cost 83 cents a therm, a typical homeowner paid $1,204 during the heating season, according to Summit. This year, at the proposed rate of 66 cents, the bill would drop to $1,084. This calculation assumes a home uses 701 hundred cubic feet of gas during the period.
Another way of looking at the cost of gas is to compare it with other fuels.
On a heat-equivalent basis, Summit’s home customers will be paying $17.85 per million BTU, according the state energy office. That compares with $13.63 per million BTU when heating oil costs $1.88 a gallon, as it did in latest state survey.
These figures compare with firewood costing $250 a cord, at $11.36 per million BTU; a ton of wood pellets costing $258, at $15.58; and a gallon of propane costing $2.18, at $23.54 per million BTU.
In reviewing the Summit request, a consultant working for the Maine Office of Public Advocate said customers shouldn’t compare the proposed winter rate to the artificially low summer numbers. The consultant wrote: “On an apples-to-apples basis, the proposed cost-of-gas rate for the 2016-17 year is actually 20 percent lower than the rate approved for the 2015-16 year. This is because New England market prices have declined, based largely on the expectation that a significant amount of new pipeline capacity will go into service later this fall.”
But this complexity wasn’t reflected in Summit’s email last Thursday, which was ordered by the PUC. Stunned by customer reaction, Adams sent a follow-up email to customers on Friday. The email acknowledged the confusion, offered an apology and tried to explain the facts. It included a chart showing the changes in “cost-of-gas adjustment” since October 2013, when Summit began service in Maine.
Summit has been expanding in the Kennebec Valley and in Yarmouth, Cumberland and Falmouth and now serves 3,000 homes. It is continuing to grow in Maine, but continued low oil prices have slowed its pace of expansion.
Making comparisons with Maine’s other natural gas companies – Bangor Gas, Maine Natural Gas and Unitil – is tricky because each company has different fees and service charges that contribute to the total bill price. Prices also can change for new and existing customers, and with fixed-rate versus variable-rate plans.
Maine’s largest gas distribution company, Unitil, serves 20,000 homes in Greater Portland and the Lewiston-Auburn area. It files a cost-of-gas adjustment for summer and winter.
For this heating season, Unitil is asking the PUC to approve 73 cents a therm, compared with 62 cents last year, said Alec O’Meara, a Unitil spokesman. For a typical home using 701 cubic feet of gas during the heating season, the bill would rise from $1,080 to $1,178, he estimated.
Unitil and its predecessor, Northern Utilities, have filed biannual cost-of-gas adjustments for decades.
“Natural gas costs are seasonal in nature,” O’Meara said. “It’s a good idea to compare winter to winter.”
Tux Turkel can be contacted at 791-6462 or at: