Have you Reviewed Savings Opportunities with your Dominion East Ohio Regulated Distribution Gas Charges Lately?
4 Jun, 2021
As strange as this might sound, did you know that Dominion East Ohio Gas (“Dominion EOG”) is no longer in the natural gas commodity business? Yes, that is a true statement! Dominion EOG does not make a profit from selling you natural gas commodity. Instead, Dominion EOG is in the gas transportation and distribution business, and they expect you to purchase your natural gas requirements from a licensed third-party supplier or from one of the programs (SSO & SCO) I will mention in a second. Currently, most companies in Dominion EOG service territory purchase their natural gas requirements directly from a licensed third-party supplier. When you purchase gas from a third-party supplier, Dominion EOG expects you to pay them to transport and deliver your third-party supplied gas from their delivery point to your facility. These Dominion EOG charges are regulated by the Public Utilities Commission of Ohio, but you do have some choice on which Dominion EOG tariff makes the best sense for you and your business. Sure, you can still purchase your gas from Dominion via their Standard Service Offer (SSO) and Standard Choice Offer (SCO) programs, but these are quasi-regulated programs where you will have less control over how you manage your natural gas risk. Furthermore, the rates which customers are charged in the SSO and SCO programs vary from month-to-month. There is no opportunity to hedge risk based on favorable market conditions with the SSO and SCO programs.
Why does it matter that Dominion EOG is no longer in the natural gas commodity business? Since Dominion EOG only makes a profit from their regulated transportation and distribution services, they have been successful in getting the PUCO to approve significant rate increases for these regulated services. We have seen a lot of commercial and industrial clients recently who have been ravaged by these Dominion EOG cost increases. When you are serviced by a certain Dominion EOG natural gas pool, they will charge you a monthly service fee to be in this pool. We have seen lots of examples recently where client’s monthly service fees have gone up over a multi-year period from $120 per month to $1166.70 per month for regulated Dominion EOG Distribution Services. On back of their bills in the small print, Dominion EOG defines a service charge as “This charge includes fixed costs for delivering gas”. In over 25 years in the energy business, I have never been able to figure out exactly what “fixed costs of delivering gas” means as they also charge you to deliver your gas to you. Service charges are not the only Dominion EOG regulated charge to increase over the years, but I will not focus on those other charges in this blog post. However, we always look at all your regulated charges when advising a client on a potential Dominion EOG tariff change.
I recently worked on a project with a new client who was using over 30,000 MCF in natural gas annually. Even though that is a lot of natural gas, they had seven Dominion EOG utility accounts which serviced their various buildings at their industrial campus. As a result, they were paying over $56,000 in annual service charges these accounts. In other words, they were paying almost $2 per MCF in monthly service charges. Wow! Their prior energy consultant did not keep them up-to-speed on the Dominion EOG gas cost increases, and, because they had not reviewed their regulated charges in years, the regulated rates they were paying to Dominion had just gotten out of hand given the amount of natural gas each of their 7 accounts were consuming. After we got involved with this client, we ended up switching them over to a more favorable Dominion EOG tariff product which ended up saving them significant dollars on their Dominion EOG monthly charges. While their gas commodity costs went up slightly, they end up saving almost $70,000 in total natural gas costs (Commodity Costs + Dominion EOG regulated charges) over the three-year term of their new agreement.
If you have not had anyone review your regulated Dominion EOG charges, please give me a call at 216-536-2582 or email me at firstname.lastname@example.org and I would be happy to help you with a complementary, no-cost review of your natural gas portfolio. Since I have personally observed quite a few similar situations, there are lots of companies in Eastern Ohio in a similar situation to the industrial client I just mentioned, and we may be able to help you find a solution which will lower your total overall gas costs.
Jim Risk, CFO/Partner at Statistical Energy LLC, began his energy and Utility career in 1997 at Ohio Edison. He was the first sales employee ever employed at FirstEnergy Solutions and was the founding business development executive at The E Group, the energy consulting group owned by FirstEnergy Solutions. He has decades of experience helping clients manage their electric and natural gas portfolios. Statistical Energy LLC (www.statisticalenergy.com), currently provides natural gas and electric brokerage services, along with many other energy management solutions, to clients in 15 States (USA) and 2 Canadian provinces.