Better than last year

Residents in northwest Iowa and across the Midwest might wince when they remember their gas bills from a year ago.

Thanks to a polar vortex that froze the middle of the country, natural gas use surged as folks huddled in their homes to stay warm. At the same time, the record-setting cold snap caused gas wells in Texas to freeze up and limit supplies. Natural gas prices subsequently skyrocketed and utilities were left to foot the bill.

Demand increased so much in February of 2021 that Hartley Municipal Utilities had to complete spot purchases, leading to a bill that was $152,000 greater than the amount it had hedged for during that time frame. However, things have been different so far this winter.

"Everything has gone relatively well, especially considering the volatility of the natural gas market," said Hartley Superintendent of Public Works Jaron Benz. "Gas supplies haven't really seen any major constraints. With the milder weather that most have seen there hasn't been as much gas drawn from storage capacity, helping to stabilize prices that were high at the beginning of the heating season."

The city council last March agreed to add 24 cents per CCF to bills for the next 12 months in the hopes of recouping the price surges. The city is almost to the finish line, and Benz expected the amount to be recovered by March or April since temperatures have been relatively mild compared to most years. Local rates will be readjusted once the amount is fully recouped.

Benz said natural gas prices started off high prior to the winter when there was more uncertainty regarding the weather, but they have mostly dipped to more manageable levels. Part of that was due to storage capacity not recovering over the summer months thanks to outside influences on the market.

Hartley Municipal Utilities and its gas supplier, Clayton Energy, hedge against changing market volatility by buying 100 percent of the average usage of natural gas in town each year. The tactic works as an insurance plan of sorts when prices spike like last February and keeps local bills stable.

"This plan will help keep rates affordable and stable while minimizing the impact of any extreme price fluctuation events that happen in the natural gas markets in the future," Benz said.

There was a question whether Clayton Energy would be able to hedge 100 percent of the city's average gas use prior to winter, but fears were for naught and the company was able to secure the full amount.

However, the mild winter has created a secondary issue with the hedge program.

"One consequence of buying 100 percent of average usage is when usage is below average some of the natural gas has to be resold on the market, and that is usually sold at a lower price which ends up a loss," Benz explained. "The additional gas was purchased at a higher price than we wanted due to market conditions at the time of purchase so it is our hopes that next heating season this gas will be purchased at a better price, in turn keeping rates lower and stable."

While the mild winter has been a welcomed reprieve for Hartley Municipal Utilities and others like it in northwest Iowa, Benz said there's always a bit of anxiety lingering thanks to last February and other factors.

"The increased volatility in the natural gas market remains a very large concern at this point as anytime there is any reason for concern, whether it be weather or any other reason, the markets reflect that by making substantial price changes," he said.