After a spike in complaints, Oregon regulators are investigating the program that adjusts 550,000 NW Natural customers’ charges up in warm winters and down in cold winters.
The Weather Adjusted Rate Mechanism (WARM) has been around since 2003. It’s intended to keep NW Natural revenues stable so the company can meet its fixed costs, even when warmer than normal weather leads to less natural gas use or colder than normal weather results in more use.
The program is in effect from December to May, and the WARM adjustments are calculated each month for various weather zones in the NW Natural service area, which runs from Vancouver down to Eugene and reaches into the Gorge and out to communities on the North Coast. Customers can opt out before the winter begins, but by doing so they run the risk of losing out on a downward adjustment in their charges in especially cold winters.
Last winter, 2014-15, was the warmest ever in much of the region. As a result, the monthly WARM adjustments often went beyond caps of $12 or 25 percent of billed gas for residential customers and $35 for commercial customers. That led to a “true-up” adjustment at the end of the winter season, with customers billed for the total WARM charges that weren’t applied each month.
That, in turn, led to complaints from 30 residential and 26 commercial customers to the Oregon Public Utilities Commission, and an investigation was launched last fall.
“Generally, of those residential customers that raised complaints about the true-up adjustment, the customers stated that they did not feel that it was fair to pay a true-up adjustment when they used less gas than usual,” NW Natural said in report [PDF] filed with the PUC as part of the investigation. “Generally, the commercial customers did not feel that the true-up adjustment was fair if they used little to no gas during the winter.”
Indeed, it seems those who used no gas at all were particularly surprised to find a big new charge on their bill.
“Some zero-use commercial customers stated that the true-up adjustment is inconsistent with the bill messages and tariff, which state that the WARM Program adjusts on a rate per therm basis,” NW Natural said.
The truth is, WARM doesn’t adjust bills based on a specific customer’s use (although volume used could impact when the monthly caps kick in). Everyone in a particular weather zone and rate class gets the same adjustment. The program was volume-based in its first year, 2003-4, but a warmer-than-normal winter led to a big new charge for high-use customers, numerous complaints and a change to the current system. And NW Natural says there’s a logic to delinking the adjustment from usage: “many of NW Natural’s fixed costs do not vary with customer usage but are instead incurred in order to allow customers to be connected with the system.”
Still, NW Natural said in its report to the PUC that it “is open to discussing the other (previous) methodology with parties and Staff in this proceeding, and believes that many of this year’s complaints would have been avoided under the prior methodology.”
If a switch back to the original method doesn’t happen, NW Natural said it would like to eliminate or at least modify the monthly WARM adjustment caps.
“NW Natural believes that WARM should be allowed to operate on a real-time basis—that is, the effects of the adjustment should be experienced in the months in which the weather variation is experienced,” the company said. “This best matches the intent of WARM, which is to adjust winter bills to be normalized for weather.”