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NW Natural Warm-Weather Charges Draw Complaints, Investigation

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.”

Electric Power Monthly Highlights

Notable in the latest EIA Electric Power Monthly, which takes us halfway through the year….

California’s solar dominance grows: In the first six months of 2014, California accounted for 52.2% of the utility-scale solar electricity (PV and thermal) generated in the United States. The state grabbed an even bigger share in the first half of this year, 56.4% (7,343 gigawatt-hours out of the U.S. total of 13,026)…. A little after noon last Thursday, by the way, solar generation in the Golden State reached a record 6,444 megawatts. Remember, too, that this doesn’t include a whole lot of rooftop solar, a subject I explored in some detail earlier this year.

Other solar leaders: Arizona follows California as the No. 2 solar state in the nation, with 1,762 GWh generated so far this year, but 2015 has seen a new state move into the No. 3 slot – North Carolina. With generation up 104.5% this year and 867 GWh generated through June, North Carolina has nudged aside Nevada (826 GWh). New Jersey (443 GWh), Massachusetts (357 GWh) and New Mexico (337 GWh) follow. These top seven states accounted for 91.5 percent of utility-scale solar generated in the U.S. in the first half of the year. A lurking state that could disrupt this leaderboard in the next year or so: Texas.

solar ytd

Coal continues to lose ground to natural gas: Generation from coal was off 8.5 percent this June compared to last June, and for the first half of the year was down 14.4 percent. Natural gas was up 22.4 percent in June, and YTD was up 19.2 percent.

coal vs nat gas chart2Wind energy’s year blows, bad: Despite increased capacity, wind generation this June was down 14.6% compared to June 2014, and YTD generation was down 5.8%. As the EIA explained recently, this was due to poor wind conditions in the West, generally, but was felt most acutely in the Pacific Northwest, where YTD generation was off 22.7% in Idaho, 26.7% in Oregon and 21.2% in Washington.

Wind’s poor year left its contribution to U.S. generation YTD at 4.7 percent, where it was two years ago. By contrast, utility-scale solar, while still small, continued to grow quickly, from 0.2 percent of U.S. generation YTD in 2013 to 0.7 percent this year.solar vs wind chart