The Town of Black Diamond anticipates a new contract is the best way to go in cutting costs in natural gas the next several months.
Black Diamond town council decided to put to tender a portion of its natural gas needs, while keeping approximately half of it on a floating rate.
The recommendation came from Les Quinton, the Town’s parks and recreation manager, who says a partial contract will prevent the Town from paying large increases in natural gas costs in certain months of the year. For instance, the average floating rate from Jan. 1 to Aug. 15 was $4.78 per gigajoule, yet the Town saw the highest rate at $9.39 in late winter, Quinton said.
“The prices are slowly going up so we’re just trying to protect ourselves so if we do get an increase we are not getting the full brunt of the increase,” he said. “We had a month over $9 a gigajoule and they are expecting a few of those in the future. It’s just to protect us a bit so we are not spending as much.”
The danger of locking in the entire amount in a contract is the contract rate is often higher than the average floating rate, said Quinton.
“I still think we are going to get some lower rates, so we don’t want to lock in all of it,” he said. “We want to lock in a portion of ours to try to protect us form those larger increases.”
When it comes to comparing natural gas providers, Quinton said various aspects will be considered including what percentage of natural gas usage will be on contract and the duration of the contract.
“The optimal price the last time I looked at something was the two to three year range,” he said. “Right now with the long term rates we probably won’t be going any more than three years.”
Quinton said the ideal time to lock into a contract is within the next couple of months when the rates are at their lowest.
“Last year the lowest price for natural gas was August to the end of October,” he said. “If it’s a way to save us some money it’s certainly worth looking at.”
Quinton said natural gas prices are seeing a steady incline with the average annual cost per gigajoule at $2.85 in 2012, $3.32 in 2013 and $5.81 for the first half of 2015.
The Town paid $11,902.58 for natural gas in 2012, not including distribution fees, and in 2013 paid $13,308.29 despite a drop in usage.
“We are starting to pay a little more attention because the prices are slowly creeping up,” he said. “Once they go up we will likely lock in for the full amount but we will have to watch the market.”
Quinton anticipates with gas-powered plants replacing coal-fire power plants in the future, will cause a larger demand on the gas supply resulting in a further increase in costs.
“I figure the prices will go up, but it’s still a few years away,” he said. “When natural gas comes online the prices are going to come up.”
