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Cedar Falls Utilities Natural Gas Update

Posted on Monday, March 1, 2021

A February winter storm produced record low temperatures across the United States and disrupted normal natural gas and electric markets.

Extremely cold temperatures led to increased demand for electricity and natural gas used to heat homes and businesses across the country. Natural gas wells froze in the southern United States, limiting supply. In addition, wind turbines and power plants in the south also experienced weather-related failures.

CFU’s natural gas and electric supplies and systems held strong during the extreme weather and customers did not experience any service impacts. However, the weather event did have an effect on wholesale natural gas and electric markets and the price of energy. CFU’s Board of Trustees approved steps today to ease customer financial impacts from the February event.

Natural Gas

The price utilities across the country paid on the market for natural gas during the storm increased to record-breaking prices, up to 100 times the normal price. The extreme market prices lasted for several days. To understand the scope of this market event, customers can relate purchasing natural gas to filling up a car with gasoline. Imagine filling up a 20-gallon gas tank in a car one day for $50. With a price jump like utilities experienced, and the next day it would be $5,000.

CFU expects this gas market event to affect customers’ utility bills. Like many utilities, CFU has a variable charge on utility bills that reflects the market price of natural gas, called the Purchased Gas Adjustment (PGA). That charge fluctuates up and down based on the wholesale price CFU pays for the energy it provides to customers. As a community-owned utility, CFU does not profit from customer rates. In the Purchased Gas Adjustment, CFU passes on to customers only the cost for the natural gas and related pipeline fees without markup.

During the extreme weather, CFU urged customers to conserve natural gas to minimize the amount of expensive energy the community needed to purchase. “CFU appreciates the efforts customers made to make smart changes and help reduce our natural gas demand,” said Steve Bernard, General Manager. Even with conservation efforts, customer natural gas usage for heating was up significantly during the extreme cold.

CFU has long-term natural gas supply contracts that protect customers as much as possible from price volatility. CFU’s advance purchase contracts that locked in prices for natural gas prior to the February event helped mitigate some market price impacts for customers. Total savings from contracted gas during the event total $4.4 million. In addition, national regulatory agencies are investigating the event to uncover any potential market manipulations.

Earlier today, CFU’s Board of Trustees met and decided to spread the utility bill impact of this event over twelve months. “Our staff and Utilities Board have been working hard to address this unprecedented event. By spreading out the increased costs over a year, we hope to ease the burden for our customers,” said Bernard.

According to current projections, an average residential customer will see an increase of approximately $45 per month for one year due to increased market costs and higher than normal usage. Bill impacts will vary depending on customer natural gas usage. Natural gas bill adjustments will likely begin in April. CFU will provide notice to customers with more details about the natural gas adjustments before implementing any changes.

Electric

Higher natural gas costs in February also drove electric prices higher. Natural gas has replaced coal as the fuel used in many power plants and the cost of electricity tends to follow the trend of natural gas prices.

Most of the time, CFU buys much of the energy supplied to the community in an energy market or pool. The energy in the pool comes from a variety of sources, including power plants fueled by natural gas and coal and large amounts of renewable wind energy.

During the extreme weather in February, natural gas was very expensive and renewable resources were running below capacity. Coupled with high demand, the average price of electricity on the energy market during the February event was approximately 15 times higher than the average cost in 2020. Energy market costs are typically passed through to customers with a variable charge on utility bills, the Electric Cost Adjustment (ECA).

CFU’s ownership of electric generating power plants helped mitigate the effect of extreme prices and maintained system reliability during the February event. CFU continues to own and operate the Streeter Station power plant in Cedar Falls. In addition, CFU owns shares of large power plants in western Iowa. The Streeter Station power plant and CFU’s share of the western Iowa units combined to provide most of the energy needed to power Cedar Falls during the cold snap. That drastically reduced the amount of energy CFU had to buy to supply to customers when market prices were high.

“While electric bills will be affected by the wholesale market cost increases in February, CFU can avoid extreme bill impacts because of our ability to produce electricity,” said Bernard.

CFU’s Board of Trustees decided at their meeting today to spread the electric bill impacts from this event over two months. CFU will modify the Electric Cost Adjustment (ECA) beginning in March. CFU projects that an average residential electric utility bill will increase by approximately $55 in March and $20 in April due to the adjusted ECA and higher than normal usage during the extreme cold. Bill impacts will vary depending on customer usage.

While these changes to the Electric Cost Adjustment (ECA) are not insignificant, CFU’s ownership of generating assets helped the community avoid the shocking electric bills reported in Texas and other locations because of the extreme weather. This storm emphasizes the importance of continued local ownership of generating resources. Cedar Falls Utilities will continue to own a diverse and robust mix of power resources.

Financial assistance for customers

Cedar Falls Utilities encourages any customer facing financial hardship to call Customer Service at 319-268-5280. There are resources available to help, include the Low-Income Home Energy Assistance Program (LIHEAP) and special assistance for customers dealing with COVID-19 related circumstances.


Thank you for your help conserving natural gas this week. CFU appreciates the efforts customers made to make energy smart changes and help our community.

The natural gas market has stabilized and extra gas conservation is no longer needed.

Earlier this week, extremely cold temperatures across the United States led to increased demand for natural gas used to heat homes and businesses. In addition, natural gas wells froze in the southern United States, limiting supply. Both of these factors mean that the price utilities paid on the market for natural gas increased significantly, up to 100 times the normal price

CFU expects this price increase to have an effect on customers’ natural gas bills. Like many utilities, CFU has a variable charge on utility bills that reflects the market price of gas. That charge fluctuates up and down based on the wholesale price CFU pays for the gas it provides to customers.

At this time, it is too early to quantify how this week's events will affect upcoming customer utility bills. The cost of fuel purchased by CFU from suppliers and the amount of energy that a customer uses both impact utility bills. Customers will receive notice from CFU before any billing changes are implemented.


Updated Tuesday, February 16:

Cedar Falls Utilities continues to urge customers to conserve natural gas as cold temperatures impact utility services across the country.

CFU does not expect any interruptions to utility services in Cedar Falls because of the extreme winter weather. While CFU’s systems are operating normally, the price of natural gas on the wholesale market remains high.

Extremely cold temperatures across the United States have led to increased demand for natural gas used to heat homes and businesses. In addition, natural gas wells have frozen in the southern United States, limiting supply. Both of these factors mean that the price utilities pay on the market for natural gas has increased significantly, up to 100 times the normal price.

CFU expects this price increase to affect customers’ natural gas bills. Like many utilities, CFU has a variable charge on utility bills that reflects the market price of gas. That charge fluctuates up and down based on the wholesale price CFU pays for the gas it provides to customers. It is too soon for CFU to know specifically when customers will see changes and what the impact will be. Anything customers can do to conserve gas now will help reduce the bill impact.

In addition to asking customers to conserve natural gas, CFU is working with area commercial and industrial customers to limit natural gas used in manufacturing or other business processes.

CFU appreciates the efforts customers have made so far to make energy smart changes and conserve natural gas. CFU is asking customers to take as many of these steps as possible:

  • Turn your thermostat down at least five degrees from your normal setting.
  • Avoid running gas fireplaces and other appliances such as garage or bonus space heaters.
  • Check window latches, secure all doors and turn off ventilation fans after use.
  • Look for other opportunities within your home to lessen the use of natural gas during this short period.

Monday, February 15: Cedar Falls Utilities is joining other utilities across the state to ask customers to conserve natural gas until at least Friday, February 19.

Extremely cold temperatures across the United States have led to increased demand for natural gas used to heat homes and businesses. In addition, natural gas wells are freezing in the southwest and limiting supply. Both of these factors mean that the price utilities pay on the market for natural gas has increased significantly.

“This is an unprecedented weather event impacting natural gas utility customers throughout the Midwest,” said Steve Bernard, CFU General Manager.

Because of record regional natural gas demand and supply restrictions, Cedar Falls Utilities urges customers to help cut our community’s natural gas usage.

The market cost of natural gas is reflected on utility bills. This issue will likely affect utility bills in the coming months, but it is too soon for CFU to know specifically when customers will see changes and what the impact will be. CFU will let customers know in advance of any billing changes. Anything customers can do now to conserve gas now will help reduce the bill impact.

CFU is asking customers to take as many of these steps as possible:

  • Turn your thermostat down at least five degrees from your normal setting.
  • Avoid running gas fireplaces and other appliances such as garage or bonus space heaters.
  • Check window latches, secure all doors and turn off ventilation fans after use.
  • Look for other opportunities within your home to lessen the use of natural gas during this short period.

In addition to asking customers to conserve natural gas, CFU is working with area commercial and industrial customers to limit natural gas used in manufacturing or other business processes.  

“We are asking our community to work together to minimize the impact of this extreme weather event. Every conservation effort by our customers reduces the cost to the community,” said Bernard.