Understanding Your Natural Gas Bill

We’ve all been there, opening the mailbox (be it physical or online) to see that monthly utility bill waiting to be opened. While the general notion of what makes up a natural gas bill is pretty intuitive (use more gas, pay more money), things are a bit more complicated than that. Here’s a quick video by the American Gas Association that breaks it all down:

There are three components driving a residential customer’s bill: the cost of the natural gas consumed, the utility’s system charge and additional taxes and fees.

The cost of the natural gas you consume is passed through to you with little or no markup by your gas utility . A mechanism called a Purchased Gas Adjustment (PGA) requires natural gas utilities to periodically adjust their prices to reflect their actual acquisition costs during that period. Those adjustments occur annually in Idaho, Oregon and Washington; quarterly in British Columbia. The Washington Utilities and Transportation Commission has a good explanation (click here to read it) of what the PGA process entails:

Companies buy gas from producers in Canada and the United States, and the price fluctuates over time. The PGA allows gas companies to periodically adjust their prices to reflect the increasing or decreasing cost of gas. Gas companies must file PGAs at least every 15 months, or within 13 months of the effective date of their last PGA they must file documents to show that a rate change is not necessary at that time (Washington Administrative Code 480-90-233). The total cost of gas is passed through to customers. This means that the company does not earn a return on or lose any money on the cost of prudently incurred gas costs.

Customers have enjoyed rate reductions and even credits to their bill via the PGA process thanks to the historic reduction in natural gas prices since 2009. A 2014 joint study by the American Gas Association and IHS CERA calculated an increase of $2,000 in disposable per-household income thanks to natural gas price reductions. A large portion of that extra cash was passed on directly to residential natural gas customers via lower utility bills.

The other component of your natural gas bill is the amount your utility charges to operate and maintain their delivery system, plus a fair return as determined by their regulators. Here’s an explainer by the Oregon Public Utility Commission that details what goes into your utility charge.

Taxes may vary from state to state, or even city-to-city, so lets not get into them here. However, the nature of those charges will likely be called out directly on your bill.