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February 2021 Energy Costs

CFU Board Approves Plan to Ease Customer Financial Impacts from February Extreme Cold

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 has approved steps to ease customer financial impacts from the February event.


NGNatural 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 your car one day for $50. With a price jump like utilities experienced, the next day it would be $5,000.

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.

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. Even with conservation efforts, customer natural gas usage for heating was up significantly during the extreme cold.

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.

CFU is taking steps to ease customer financial impacts from the February weather event. CFU will spread natural gas utility bill adjustments due to extra usage and increased costs over 12 months. Instead of a one-time large increase to the Purchase Gas Adjustment (PGA) to reflect the extreme prices in February, CFU will add a new gas market adjustment to utility bills for 12 months. This will allow the impact of the event to be spread out over time.

Impacted customers will receive notification with their total February natural gas usage and monthly natural gas market adjustment.


ElectricElectric

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.

CFU’s Board of Trustees decided to spread the electric bill impacts from this event over two months. The Electric Cost Adjustment (ECA) was modified 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, including the Low-Income Home Energy Assistance Program (LIHEAP) and special assistance for customers dealing with COVID-19 related circumstances.

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