Professor Sherry Jarrell believes a rate drop by Piedmont Natural Gas would be welcomed by consumers

2.18.2010 Article, Business Analytics, Faculty News

Piedmont Natural Gas is asking for 5 percent rate increase
Originally Posted on Thursday, February 18, 2010 | By Richard Craver
Reposted from the Winston-Salem Journal

Piedmont Natural Gas said yesterday that it is pursuing regulatory approval to reduce its residential customer billing rates by 5 percent.

The company, which serves about 700,000 customers in North Carolina, filed the request with the N.C. Utilities Commissions and S.C. Public Service Commission on Monday.

If approved, the rate decrease would go into effect March 1.

Natural-gas utilities are required to pass along any savings on its wholesale cost to customers. Utilities can request rate adjustments on a monthly basis.

For example, PSNC Energy, which serves the Triangle, has filed for a 10.5 percent rate increase, also effective March 1. According to the Raleigh News & Observer, it is the first rate increase sought by PSNC following eight consecutive rate decreases.

Piedmont said that the wholesale cost of natural gas typically represents between 65 percent and 70 percent of a customer’s bill.

David Trusty, a spokesman for Piedmont, said that the rate request also reflects a decrease in demand for natural gas at a time when supply has increased in recent months.

“Low customer demand related to the recession has had a dampening effect on how much natural gas, or most energy sources, has been used,“ Trusty said.

The utility has been affected by the slowdown in commercial and residential construction, which has tilted toward natural gas as an energy option in recent years.

In October, Piedmont projected up to a 20 percent decline in residential customers’ monthly bills this winter, or a range of $15 to $25, compared with 2008.

The projection came from an expectation of normal winter temperature based on a 30-year average. It wasn’t clear yesterday whether that decrease had occurred given the recent wintry weather in the Carolinas.

The rate drop would be welcomed by consumers given the recession, said Sherry Jarrell, a professor of finance and economics at Wake Forest University.

However, Jarrell said she wouldn’t be surprised to see Piedmont request a rate increase later this year if the supply of natural gas begins to diminish.

“A lower rate can potentially discourage utilities from pursuing new supplies and new discoveries the way it does with other sources of energy,“ Jarrell said.