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National Grid’s weather-adjustment charge for mild winters helps recoup losses

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National Grid’s weather-adjustment policy for natural gas users has puzzled residents, as they have had to pay “adjustment for weather” charges despite using historically low amounts of gas to heat their homes last winter.

The policy attempts to even out the amount of money National Grid loses during unusually mild winters by charging customers to make up the difference, using a 30-year average weather forecast as a measuring stick. Conversely, customers are reimbursed when temperatures are lower than normal and they use greater amounts of gas to heat their homes. National Grid makes these adjustments during its six-month winter season from November through March.

The policy was started in the 1970s following several unusually cold New York state winters in which customers used high amounts of gas, said Anne V. Dalton, spokeswoman for the state Public Service Commission, which oversaw the establishment of the policy.

“There were very cold winters and the utilities were making a lot of money, so the policy came about because they were bringing in more money than they needed to deliver services,” Ms. Dalton said. “So the idea with coming up with the weather-normalization calculation was to have a mechanism available that also protects the company at the same time” for when it isn’t drawing enough revenue during mild winters.

This winter, adjustment fees for customers were much higher than usual because temperatures averaged about 20 percent higher than normal, Ms. Dalton said.

Weather-adjustment rates for customers vary based on the amount of gas they use, Ms. Dalton said.

To help evenly distribute the amount each customer pays, households that use less gas than other users are charged more based on the number of decatherms they use. For instance, if National Grid needs households to use an average of 100 decatherms of natural gas during the winter season to pay for its operational costs, it charges more from customers who use less gas. While customers who use more gas still have much higher bills, their weather-adjustment fees are lower because they already are paying more for delivery services.

Ms. Dalton said the system is designed to ensure that everyone chips in a fair amount to maintain delivery services.

“Customers who are paying a higher delivery charge are subsidizing lower-volume customers to an extent, which is why they are charged more to make up for it,” she said.

Even with the higher weather-adjustment rates this winter, customers’ gas bills were at historic lows because of low usage levels and the relatively low price of natural gas, said Cynthia H. McCarran, PSC chief of gas policy and supply.

National Grid purchases 60 percent of its winter-season natural gas by November and buys the rest throughout the season. Prices were in the range of $5 per 1,000 cubic feet this fall, but dipped to about $2 by the end of the winter season in March.

“Going into the winter, our analysis indicated that gas bills were going to be lower than 10 percent compared to last winter, and they were even higher,” Ms. McCarran said. “I think that customers are noticing the (weather charge) more now because their commodity prices were so low. They’re not used to paying bills this low, but they see the extra (weather) charge and don’t know what it means.”

Theoretically, the weather-adjustment charges that customers pay during mild winters should be offset over the long term by reimbursements during unusually cold winters, Ms. McCarran said. When weather is colder than the 30-year forecast, customers are reimbursed based on number of decatherms of natural gas they purchase.

“Ratepayers will still always save money based on the amount of gas they don’t use, but these are a way to ensure the provider doesn’t go bankrupt,” Ms. McCarran said.

National Grid also offers customers a “budget billing” program that establishes a fixed monthly rate, which is calculated based on an average commodity price and an estimation of the household’s gas usage. Under that plan, customers are charged or reimbursed at the end of the year based on their actual usage and the weather-adjustment formula.

Customers who have questions about their National Grid gas bills are encouraged to call the Public Service Commission at 1 (800) 342-3377.

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