Natural gas prices dropping

Temperatures might be heating up, but Peoples Natural Gas prices are cooling off.

The utility announced Friday that the cost customers pay for the actual gas usage – known as the cost recovery rate – will drop starting Monday. The cost of the gas makes up about 75 percent of a residential customer’s bill.

“We owe customers money,” Joe Gregorini, Peoples manager of pricing and regulatory affairs said. That’s because the company’s projections for purchasing gas over the past three months from its producers, mostly local mom-and-pop producers and farmers sitting on Marcellus Shale gas wells in western Pennsylvania, were higher than the actual cost, he said.

The assumptions Peoples makes in purchasing gas affects the part of customers’ bills involving pass-through costs.

The average customer bill will decrease by 8 percent, or from $84 per month to $77 per month for the quarter beginning July 1 and lasting through September. Peoples does not expect costs to rise for the next quarter either.

“The trend is for it to go down because there is more supply,” Peoples Communications Manager Barry Kukovich said, with more Marcellus Shale wells being drilled in the state.

However, Gregorini said the decrease involved with customers’ pass-through cost does not affect a third of the company’s total customers in 16 western Pennsylvania counties.

A third of the company’s customers purchase gas directly from a producer of their choice, which could be from as far away as Texas or Oklahoma. Those customers, none in Altoona, only pay base rate costs to the company for operations, maintenance and infrastructure.

Gregorini said customers’ bills are divided into two parts – the base rate, which is not changing, and pass-through cost.

He also said pass-through costs vary among companies, because each company has someone making assumptions on the market price of gas and companies purchase from a wide selection of producers.

“Market prices change daily, hourly,” he said.

Jake Rubin, spokesman for the American Gas Association – a trade association of 200 companies nationwide, said the trend of lowering pass-through costs is nationwide.

“Overall yes, we have an abundant supply of gas in this country because of areas like Marcellus Shale in Pennsylvania and because of advanced drilling techniques to get that gas. That abundance is creating affordable prices around the country,” he said.

“It’s a big story for Pennsylvania,” he said. “All the hard work folks in Pennsylvania are doing to drill natural gas is going directly to customers nearby.”

Mirror Staff Writer Russ O’Reilly is at 946-7435.