When you pay your gas bill, you are paying for the gas you use, plus the costs of transporting it and delivering it safely to your home or workplace. Natural gas is traded on the commodity markets and prices cycle from highs to lows like other commodities
such as oil, coal or gold. To help even out the natural highs and lows in gas prices, while also sending a price signal that prices are lower or higher, the Arizona Corporation Commission permits companies to use a cost recovery mechanism called the
Purchased Gas Adjustor or PGA.
The PGA mechanism adjusts monthly to reflect changes in Gas Company's average cost of natural gas over the previous 12 months. The PGA cost reflects the difference between the base cost of gas (already built into the gas company's gas usage rates) and
the company's actual cost of the natural gas commodity and subsequent delivery of the commodity to Arizona natural gas utilities. If there is a large change in natural gas prices, the company may apply a temporary surcharge or credit pursuant to parameters
approved by the Commission. The Commission monitors each gas company's PGA bank balance to ensure that the company is properly accounting for its natural gas costs. Gas procurement activities by Arizona natural gas utilities are typically also reviewed
in general rate proceedings before the Commission.
It is important to note that natural gas utilities are not allowed to make a profit on the cost of natural gas. You pay the natural gas utility for the fuel you use on a dollar-for-dollar basis. The gas company earns a rate of return based on the costs,
other than the commodity cost, of delivering gas to customers. The cost of putting the pipe in the ground, maintaining the meters, customer service, having crews available to respond at a moment's notice to an emergency, training and other expenses.
These other expenses are examined during a rate case.
Gas Usage:
This represents the cost per therm of gas you use. These rates are set by the Arizona Corporation Commission after we examine all the company's costs of providing service. A customer's meter measures the volume of gas in cubic feet, which is then converted
into therms, a measure of heat content, via an established set of calculations.
Basic Service Charge or Delivery Charge:
This is a flat monthly fee representing some of the fixed costs that go into making gas available at your home or business, regardless of your usage, the time of year or market prices.
Rate Adjustment:
This is a surcharge that covers costs associated with certain residential conservation and low-income, and infrastructure and other programs. The ACC limits how much the surcharge can be adjusted up or down each month.
Monthly Gas Cost or Purchased Gas Adjustor Rate:
This reflects the average cost of gas over the previous 12 months as calculated using the Commission approved purchase gas adjustor.
PGA Surcharge/Credit:
This is a temporary surcharge or credit per therm to reflect movement in the cost of natural gas paid by the utility that is not fully captured in the monthly gas cost/purchased gas adjustor rate. These generally occur when there is a significant increase
or decrease in the cost of natural gas.