Dalton Utilities’ electric customers will see their rates go up for the first time since 2015 starting in March.
The utility’s board voted 5-0 Monday to add a flexible fuel adder, or surcharge, to commercial, industrial and residential electric bills to offset the rising costs of natural gas. The adder will start on March 1. The amount of the surcharge will vary based on the price of natural gas and will decline if prices begin to decline.
Dalton Utilities CEO Tom Bundros said natural gas prices rose 24% in 2021 from 2020. He said the fuel adder is aimed solely at offsetting higher fuel costs and won’t increase the utility’s profit margin. Natural gas accounts for 61% of Dalton Utilities’ fuel capacity.
In recent months, natural gas prices have been trending at around $4 per Metric Million British Thermal Unit (MMBtu), the unit used to measure natural gas. At those prices, the average residential customer would see his or her monthly power bill go from $93.50 to $110.25.
Some board members expressed concern about the size of the rate increase and its impact on low-income households.
“For some people, this could be devastating,” said board member Mark Mixer. “Is there some way we can smooth this out over the course of the year so it doesn’t hit people all at once?”
Bundros admitted that is a large increase.
He noted the utility has a program called CARE, which provides funds to the Salvation Army to help those in need pay for utilities. The funds come from the utility’s round-up option, which lets customers round their bills up to the nearest dollar.
Board Chairman Joe Yarbrough said the board and the management of Dalton Utilities have to balance providing reliable electricity at the lowest cost with remaining financially stable.
“We have to remain a viable entity,” he said.
What’s driving the cost of natural gas upward?
“I hate to sound political,” Bundros said. “But one of our president’s (Joe Biden) first actions at the start (of 2021) was removing all federal land from gas exploration and production. That removed roughly 15% of lands available for oil and gas. The other factor is that any time there is any type of geopolitical concern, such as in the Ukraine, it affects natural gas and oil prices. Russia feeds natural gas to basically all of Europe through (pipelines in) Ukraine. If that turns into a war, that gas could get shut down.
Those European countries would turn to natural gas from the U.S., shipped as liquified natural gas on tankers, taking supplies out of the U.S., driving up prices.”
Natural gas prices averaged $2.03 MMBtu in 2020 and $2.62 MMBtu in 2015, the last year in which the utility raised its electric rate. Utility officials said if they fall back to $2.80 it would completely cancel the adder.
Bundros noted it isn’t just the price of natural gas that is skyrocketing, the price of gasoline is soaring as well.
The average national price of regular unleaded gasoline on Tuesday was $3.53 a gallon, up 34% from $2.63 a gallon on Feb. 22, 2021, according to AAA, and the possibility of war in Ukraine threatens to push that up further.
The price of Brent crude oil, the most widely traded oil internationally, rose to $99.38 a barrel on Tuesday, a seven-year high, before slipping slightly.