Pricing and Purchasing

How Gas Cost is Calculated

Several years ago the Town Administration and Town Council prepared a Natural Gas Purchasing Plan. The plan addresses gas purchases in specific volumes at a locked in price. The town may purchase several tiers of gas (depending on the future price) during the year in an effort to keep the consumer gas cost from being affected by very high spikes.

The remainder of the gas needed to supply the town’s consumption is bought at index price (whatever market price is at the time). Natural gas usage can vary depending on the weather, supply, commodity, and emotion. Therefore, it is important to only guarantee a portion of the projected annual usage avoiding over purchases.

This approach helps protect the town in part from very unstable index pricing.

The customer gas rate charged consists of three parts: town operating cost, transportation cost, and gas supply.

  1. Town Operating Cost – covers the cost to operate the gas department (includes administration, billing, dispatching, etc.), capital outlay, and improvements to the distribution system.
  2. Transportation Fee – covers the cost to transport natural gas to Rangely.
  3. Natural Gas Supply – covers the cost of natural gas needed to supply the Town of Rangely.
    Note: This cost goes up and down depending on the uncontrollable index price and the Natural Gas Purchasing Plan (locked in gas). This cost is passed on to the consumer.

Example of how these 3 parts add up to make the gas rate for each billing cycle, please understand that actual pricing is variable:

Operating Cost ............ 0.30 Per/CCF
Transportation Cost ......0..047 Per/CCF
Supply Cost .................0..37 Per/CCF
Total...........................$.72 Per/CCF