Natural gas bills in Lawrence would jump by 22% a month for next 5 years under plan to deal with polar vortex costs
photo by: Charlie Riedel/Associated Press
There was a time during February’s polar vortex when I thought it might take me five years to feel my fingers again. Instead, it may just take me five years to pay off the gas bill from the historic winter storm.
That’s not hyperbole. Black Hills Energy, the largest natural gas provider in Lawrence, has announced its plan for charging people for the large amounts of expensive natural gas that were used during the polar vortex. It involves a 22% increase in monthly natural gas bills for the next five years. Black Hills is estimating that for a typical residential customer that will be an increase of $12.23 per month.
My fingers still function well enough to do that high-level arithmetic: $12.23 times 60 months, also known as five years, is $733.80. That’s for basically two weeks worth of natural gas. This polar vortex was expensive. There’s no way around that.
But there are multiple ways to pay for it. Black Hills is one of the first area utilities to spell out its plan. The plan, though, must still win approval from the Kansas Corporation Commission, which is the body that regulates public utilities.
Whether you will root for the KCC to approve the Black Hills plan may depend on how much cash you have in the bank to pay unexpected bills — and also what you think of the idea of paying interest costs for a big company.
If Black Hills didn’t submit this special plan, the current system would allow the utility to recoup those unexpected natural gas costs from customers over a period of 12 months. For the typical residential customer that would be an extra $53.51 per month for an entire year. That’s about a 96% increase in the average monthly bill.
“In essence, following the normal ACA calculations, customers’ bills would nearly double beginning November 2021,” Robert Daniel, manager of regulatory and finance for Black Hills, told the KCC in written testimony.
That may be a yearlong shock to the system for many people. So Black Hills is proposing to deviate from normal practices and spread the cost over 60 months, resulting in $12.23 per month increase for the typical customer. But that 60-month plan also includes the equivalent of an interest fee of 7.98%. The company calls it a “carrying cost,” but it basically represents the interest and fees that Black Hills must pay to its lenders. Black Hills, like many utilities, had to borrow money to pay its natural gas suppliers following the polar vortex.
Those carrying costs do cause the 60-month plan to be more expensive than the 12-month plan in total. As I noted earlier, the 60-month plan equates to $733.80 in payments for the typical customer. The 12-month plan equates to $642.12 for the same customer, a difference of about $92.
Black Hills is betting that most customers will appreciate having more time to pay, even if the total cost is a bit higher.
“The financial well being of our customers is important to us and we recognize how these additional costs can impact a family budget,” Jerry Watkins, general manager of Kansas operations, said in a written statement. “We remain committed to supporting reasonable energy costs. Spreading the costs over the course of five years will result in a lessened impact to customers’ bills.”
Customers should expect to see the additional charge on their bills as soon as August. Black Hills spokesman James Williams said the company intends to add a separate line item showing the fee related to polar vortex. That charge is expected to begin showing up on bills in August, but is somewhat dependent on when the KCC considers Black Hills’ plan.
A spokeswoman with the KCC told me a date hasn’t yet been set for regulators to consider the Black Hills plan.
Some of you may think you already had taken care of your obligations related to the polar vortex. After all, your March bills probably were significantly higher following the February storm. Those higher bills, however, only reflected the higher-than-normal amounts of gas you used to heat your homes. They did not reflect the much-higher-than-normal price for gas that existed during the polar vortex, Williams said.
As we reported at the time, utility companies received approval to charge people a more normal price during the storm, with the idea that they would come back and create plans to reasonably collect those higher prices over time.
This Black Hills plan may be the first taste of that for Lawrence customers. It may not be the last, though. Evergy, the largest electric utility in Lawrence and Kansas, also is expected to submit a plan to recoup its costs from the polar vortex. A KCC spokeswoman said the agency hasn’t yet seen that plan.
As customers sort through all of this and start feeling it in their pocketbooks, it is worth remembering how crazy natural gas prices got during the winter storm. I reported back in March that Black Hills estimated it had about $600 million in unexpected natural gas expenses in February. That was for all its territory, not just Lawrence and Kansas. Since then the company has calculated its unexpected gas bill for the Kansas territory was $87.9 million. That bill was fairly mild compared with some other regional natural gas utilities. Atmos, which serves parts of Douglas County, had about a $2.5 billion bill in February.
To put it another way, some natural gas companies spent in one month what they normally would spend on natural gas for four years.
Those huge gas bills were driven by unprecedented spikes in natural gas prices on the open market. When I reported on the issue in March, regulators said they were very interested in finding out more about why natural gas prices spike so much and why utility companies weren’t better protected against the spikes.
Depending on what they find, utilities may have to eat some of those costs rather than pass them along to customers. A spokeswoman for the KCC confirmed to me that regulators are in the process of conducting that inquiry, but there weren’t any findings to share yet.
But that will be an issue worth watching in the weeks and months ahead. I’m not sure thinking about the polar vortex is a great strategy for cooling off during a sweltering summer, but it appears we’re going to get a monthly reminder of it, regardless.