PPL Gas Utilities filed a request with the Pennsylvania Public Utility Commission today (5/1) to cut customers' gas supply costs by more than $1 per dekatherm, or about 8 percent, effective Dec. 1, 2006.

This change affects only the gas supply portion of the bill. Gas supply charges and delivery charges are the two components of customers' bills.

"Natural gas prices have dropped somewhat from the highs experienced after last summer's Gulf Coast hurricanes, which disrupted already tight supplies," said Robert M. Geneczko, president of PPL Gas Utilities. "A warmer than normal winter also helped reduce demand.

"As a result of the lower prices, we expect to be able to pass on a decrease in the gas supply portion of the bill."

If the request is approved, the total monthly bill for a residential customer using
8 dekatherms would decrease by $8.58, or about 5.7 percent. The total monthly bill for a commercial customer using 32 dekatherms would decrease by $34.32, or 6.4 percent. The total monthly bill for an industrial customer using 173 dekatherms would decrease by $185.58, or 6.7 percent.

Separate requests to the PUC
The company's request to decrease gas supply rates follows a request Thursday (4/27) to increase the company's natural gas delivery rates for the first time in more than five years. The two requests are considered separately by the PUC.

Delivery rates last changed Jan. 1, 2001. The company has requested increasing delivery rates by about $12.8 million, effective July 1, to ensure that it can continue to invest in its delivery system and provide safe and reliable service to customers.

If both requests — to increase delivery rates and decrease gas supply rates — are approved, the net effect would be an increase of about $2 on the average residential customer's total monthly bill, or about 1.3 percent. The net effect for the average commercial customer would be a decrease of more than $9. The net change for the average industrial customer would be a $90 decrease. 

Gas delivery versus gas supply
For the average residential customer, gas supply charges make up about 72 percent of the monthly bill, while delivery charges account for about 28 percent. Delivery charges cover the cost of billing, meter reading, underground pipelines and equipment needed to serve customers. Gas supply rates cover the cost of the gas itself.

Increases in gas supply costs — delivery charges did not change — drove the price increases experienced by customers this winter.

On behalf of the customer, PPL Gas Utilities negotiates with wholesale natural gas suppliers for a reliable and cost-effective supply of gas. Customers pay the cost to procure that gas, without any markup or profit for PPL Gas Utilities. Gas suppliers and interstate transport companies profit from the gas supply costs.

"Our business is the delivery of natural gas," said Geneczko. "We are not a gas producer. Rather, we purchase gas on behalf of customers as a provider of last resort. Our profit comes from moving gas through our delivery system to customers, so the more gas we move, the better we do.

"As a result, lower prices are not just in our customers' best interest, but in the company's, as well," he said. "That is why we're pleased to see gas supply prices going down."

PPL Gas Utilities, a subsidiary of PPL Corporation (NYSE:PPL) provides natural gas delivery service to 76,000 homes and businesses in 34 Pennsylvania counties and a small portion of Maryland.