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Utility Increasing Default Service Rate, Citing "Sharp Increase" In Wholesale Prices

December 31, 2018

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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New Jersey Natural Gas (NJNG) has notified the New Jersey Board of Public Utilities (BPU) that it intends to implement a 5 percent Basic Gas Supply Service (BGSS) increase for residential and certain small commercial customers effective February 1, 2019, due to, "a spike in wholesale natural gas prices," NJNG said

Under the change, the BGSS price (default service) for residential customers is increasing from $0.3646 per therm to $0.4129 per therm.

NJNG said that, "This BGSS adjustment is a result of the increased cost of natural gas commodity prices, which are passed through directly to customers, and does not reflect an increase to NJNG’s profits. Since the time of NJNG’s BGSS filing in May, the wholesale natural gas prices for the winter months of December 2018 through March 2019 have increased by as much as 44 percent. The combination of colder weather in October and November 2018 and the potential for sustained cold weather this winter in a market with constrained access to supply and growing peak day demand are some of the factors contributing to the price surge."

"Colder winter weather has come early and is having a significant impact on wholesale natural gas prices," said Steve Westhoven, president and COO of New Jersey Natural Gas. "While we are committed to utilizing effective purchasing strategies to manage supply, mitigate market impacts, and serve our customers, we, unfortunately, have no control over wholesale natural gas market prices. Even with this BGSS increase, customers’ bills are still roughly 40 percent lower than 2008."

In accordance with a January 6, 2003 BPU order, New Jersey’s utilities are able to implement rate adjustments of up to 5 percent in December and February. NJNG said that this allows for the necessary cost recovery to keep pace with any wholesale natural gas market trends.

"Through its established hedging practices, NJNG secured the price for the large majority of its anticipated natural gas supply for normal winter weather operations during the summer months when prices are typically lower. The ability to do this helps to minimize the impact of price volatility on customers. Due to current market conditions, however, it is not sufficient to meet the increased demand and offset the impact of the higher prices," NJNG said

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