Midlands Voices Column by M.U.D. President Mark Doyle
As colder weather arrives and we turn up our thermostats, customers of Metropolitan Utilities District can be assured that their public utility is focused on providing them with safe, reliable and affordable natural gas service.
While some regions of the U.S. are experiencing higher gas costs due to increased demand, reduced storage inventories and production impacts from Hurricane Ida, M.U.D. has strategies in place to minimize the effects on its customers.
M.U.D. relies on a multitude of natural gas purchasing strategies, such as contracting with the Central Plains Energy Project and participating in long-term purchase arrangements for a significant portion of our gas supply; these strategies allow for a fixed discount to market prices on approximately 60 percent of required volumes.
M.U.D. also owns and operates storage facilities, including a liquefied natural gas (LNG) plant and propane storage caverns. These assets enable us to provide additional natural gas supply during periods of peak demand, thereby lessening the need to purchase volumes on the spot market, which can be extremely costly.
The culmination of our efforts is demonstrated by the fact that M.U.D.’s customers continue to receive natural gas at a cost that is among the lowest in the nation. To help measure affordability, we compare ourselves to approximately 40 other utilities from the annual Memphis Gas, Light and Water survey. Our gas rates rank second lowest as measured by the average residential gas bill in 2021.
The benefit of our natural gas purchasing strategies coupled with our storage facilities, was most recently demonstrated this past February during the polar vortex, when frigid temperatures affected states from as far south as Texas and upwards throughout the Midwest. During this stretch of cold weather, M.U.D. customers used approximately 50% more gas on average, and we sent out a record amount of gas on February 15.
Due to the efforts of our dedicated employees as well as our supply strategies, M.U.D. was able to meet the increased demand for our customers. District-owned storage delivered nearly 40% of natural gas demand to our customers over this six-day period. Aside from service reliability, our facilities provided significant cost avoidance of $100 million, as we did not need to purchase this natural gas on the spot market during times of record high prices.
As a result, our average residential gas customer incurred approximately $26 in incremental natural gas costs due to the polar vortex, $17 of which related to increased usage in February, with the remaining $9 due to higher underlying natural gas costs. If the gas had instead been purchased on the spot market, this increased cost could have been higher — by more than $200. Other utilities that did have to pay these higher gas prices are now passing along those costs to their customers and in some cases, spreading the costs over several years.
The entire M.U.D. team is proud of these results; however, we strive to do even better by improving the reliability and resiliency of our systems. Over the last decade, there has been a tremendous effort and investment to update our infrastructure and facilities to meet the needs of the future.
To that end, the M.U.D. Board of Directors approved a $78 million capital improvement project to expand our LNG plant, which will substantially improve the reliability of the facility for the next 40 years. This project, financed with revenue bonds, is anticipated to be completed in 2025. We commend the board members for their support of this initiative that will positively impact our customer-owners and the community for many years to come.