Low regional gas prices, Questar-owned supplies holding down gas prices

In contrast with national projections, Questar Gas is expecting relatively stable natural gas-supply costs this winter. The Rocky Mountain region is experiencing gas prices significantly lower than the rest of the nation. And Questar Gas is able to save its customers even more than other regional companies because of a unique advantage: company-owned reserves.

According to the U.S. Energy Information Administration, utilities across the nation, which purchase their gas supplies on the open market, are anticipating gas-cost increases of 15-20 percent this winter. But currently, pipelines and storage fields in the Rockies are full of gas looking for customers. It all adds up to more stable gas-supply prices for Questar Gas.

"Currently, we don't anticipate gas-cost increases anywhere near what's being forecast for the rest of the nation," said D.N. Rose, Questar Gas president and CEO. "It's a simple case of supply and demand. Rockies gas production has been outpacing both the regional market and the capacity of the interstate pipelines that export the gas to national markets. Eventually, projects like the Kern River Pipeline expansion could drain the Rockies bubble and the region could reach equilibrium with the nation."

And Questar Gas has yet another advantage that helps hold prices down. The company is one of the few utilities in the nation with significant company-owned gas supplies. The company-owned gas is developed by Questar affiliate Wexpro Co. under a longstanding agreement with Utah and Wyoming regulators. In times of fluctuating gas prices, company-owned supplies provide Questar Gas some extra flexibility that softens the blow for  customers.

This company-owned production represents about half the company's total gas supply and is delivered to customers at ‘cost of service,' which means the costs of producing and transporting the gas instead of market prices.

About half of a customer's bill reflects the cost of the gas itself. Gas costs are passed through to customers on a dollar-for-dollar basis through periodic purchased-gas adjustment filings. In other words, there is no "mark-up" or profit for Questar Gas on the gas-cost portion of customers' bills.

Questar Gas typically seeks the Public Service Commission's approval each summer to adjust its rates to reflect changes in gas costs.  However, this summer the availability of low-cost regional supplies made a rate change unnecessary. If high prices return, Questar Gas customers will see higher prices, but company-owned gas will ensure that prices are not as high as in other areas.

The other half of the customer's bill consists of non-gas costs, such as system maintenance and other expenses related to delivering gas to customers, bill processing and investor returns. The company is currently asking the Utah Public Service Commission to approve a rate increase to cover increases in these costs. If approved, it would add about three dollars to the typical customer's monthly bill.

Questar Gas serves more than 720,000 customers in Utah and portions of Wyoming and Idaho. As a percentage of household budgets, the annual bill for a typical customer in 2001 is still below what it was 17 years ago.

"While gas-supply costs may be stable, individual bills are determined by usage patterns and weather," said Rose. "We had a mild winter last year, and colder weather could mean customers will use more gas no matter what the rates are."

"The increasing demand for natural gas will undoubtedly lead to future price increases," Rose said. "But we intend to keep our rates as low as possible and use our company-owned supplies to mitigate higher costs while ensuring reliable service."