Natural Gas: Utilities Halted Hedging Program in 2011

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a bid to deliver stable rates to natural gas customers.

The $140 million could be losses for the total 15 years; or it could be losses for the past five years, Nester said. He won't know until he completes the audit, which he expects to do in the next 60 days.

"We are trying to make sure we put this in the proper context," Nester said.

Utilities halted its natural gas hedging program in 2011 when it saw that predicting the gas market was not going its way.

All the while, ratepayers have had consistent rates, said Bill Cherrier, Utilities chief planning and finance officer. A typical customer using 60 cubic feet paid $34.50 a month in 2002; $47.55 in 2007; and $46.63 in 2013.

"The goal was to provide price stability," he said. "It did exactly what we intended it to do."

The hedging program never was about chasing the lowest prices, Cherrier said. It was about providing stability in the rates to the customers.

Utilities began the natural gas hedging program in 1997, when the market saw sharp increases and sharp decreases month to month in natural gas prices. Until 2006, Utilities was being praised for its savvy program, which that year reported saving ratepayers $32.7 million over five years.

Without hedging, customers would have paid market rates. For example, in January 2000 the price was $2 per 1,000 per cubic feet; in January 2001 the price was $9, Cherrier said.

Then in 2008, the economy took a turn south. Industry experts predicted a rise in natural gas prices. Natural gas buyers, including Utilities, locked in their price for three years. …