What are the pricing components that make up my natural gas bill?
The typical natural gas bill is made up of the following charges:
- a Monthly Customer Charge expressed in a fixed dollar amount each month
- a Distribution Charge expressed as a unit charge per 100 cubic feet (Ccf)
- a Gas Cost Recovery Charge (or gas charge) expressed as a unit charge per Ccf
Other charges may appear for different services or purchases. See current rates. Examples are:
- a balancing charge
- a capacity charge
- a Home Heating Maintenance Plan charge
- a CAP (Customer Attachment Program) charge
- an AEP (Area Expansion Program) charge
Do gas utility companies make a larger profit if the gas costs they pay to purchase gas on my behalf goes up?
No. Gas utilities do not make their profit selling natural gas. Gas costs are an expense item that is simply passed on to the customer on a dollar for dollar basis, provided the cost were incurred in a reasonable and prudent manner. The utilities profit margin is built into their distribution charge.
How can an alternative gas supplier purchase and sell gas for a lower price than the gas utility?
Some alternative gas suppliers are as large or larger than the utilities that serve you. Alternative gas suppliers can take advantage of a period of low prices and hedge those prices into the future which can provide customers with a lower price especially if the future market price increases. They can also use different levels of interstate transportation services than the utilities to get the gas they purchase from the producing regions of the country to Michigan at an expense which could be lower than what the utility pays. Gas utilities purchase gas throughout the year typically at market prices and the 12 monthly Gas Cost Recovery factors make up the forecast of what the utility expects their actual gas costs will be over a 12 month period. As the 12 month period comes to a close, the utilities actual costs are known and the Commission performs an audit of the utility gas costs and revenues collected to insure the utility does not over or under collect its gas costs.