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FAQs About Changes in Pensacola Energy’s Rate Structure

1. How is Pensacola Energy’s gas rate structured?

The current gas rate, which went into effect with Cycle 01 billing, October 2011, is a single block system that is comprised of three parts: customer charge, fuel cost and distribution cost. You pay the same rate per unit regardless of the amount of natural gas consumed. The current components will allow adjustments to your account based on fuel cost and abnormal weather.

Customer Charge – is a fixed monthly cost to provide natural gas to your home or business. It covers the cost of billing, meter reading and equipment at the service address. This will also be your minimum bill regardless of the amount of natural gas consumed.

Fuel Cost – includes the commodity cost to purchase and transport natural gas to the City’s distribution system.

Distribution Cost – includes all other costs for operation and maintenance of the gas system, materials, equipment and facility costs.

Purchase Gas Adjustment (PGA) – is the recovery mechanism or model for the fuel costs. If fuel costs increase or decrease, then the PGA will adjust up or down. The adjustment will be passed on to the customer on his/her monthly bill.  The PGA reflects the actual cost of natural gas.

Weather Normalization Adjustment (WNA) – is a factor used to adjust the gas rate due to the effect of the weather. When the WNA is in effect, the customer’s bill can adjust downward as a result of colder than normal periods or adjust upward as a result of warmer than normal periods. By having WNA, customers can benefit from more stable bills. The WNA reflects the weather for the current bill.

2. What does Pensacola Energy do to keep the cost of fuel steady?

We make every attempt to lock in gas at competitive pricing in order to cover the basic needs of our customers. The balance of the gas is purchased on the daily market and is subject to some price volatility.

3. How does natural gas compare with other energies? Should I consider converting my appliances?

The energy marketplace as a whole is undergoing changes that affect the pricing of all energy sources (electricity, propane and fuel oil). Colder weather and economic fears have put a strain on all energy supplies. As reflected at the gasoline pumps, oil prices have remained high. Propane, as a by-product of natural gas, is also very costly now.

Natural gas is still the best energy value. It is the cleanest and most efficient fossil fuel, and it is safe and reliable. So converting your gas appliances to electricity would be ultimately more costly.

4. Is there plenty of natural gas?

Ninety-seven percent of the supplies used in the United States are produced in North America, and there are abundant supplies. Energy experts believe that the United States has more than one hundred years of natural gas supply. Thanks to new drilling technologies with shale rock, substantial amounts of natural gas reserves are available in the United States, much more than previously thought. Natural gas is emerging as a critical alternate fuel for the nation’s energy use.

5. Does the price of gasoline have an impact on the price of natural gas?

Not really. The two fuels are independent of one another. Gasoline is a refined product of crude oil, and thus directly related to the price of oil, while natural gas is produced directly from underground hydrocarbon deposits, like crude oil.

Natural gas prices are dependent on the supply and demand for natural gas. In some instances, crude oil and natural gas are found in the same place and produced together. Fuel oil, like gasoline, is a refined product of crude oil and is also a substitute fuel for natural gas in some industrial facilities. In these cases, fuel oil competes with natural gas. Because oil prices are high, fuel oil does not offer much competition to natural gas and does not help to keep natural gas prices down.