City of Gallatin Explains Recent Natural Gas Bill Increases Following Ice Storm

Gallatin Public Utilities (GPU) is addressing recent questions from residents who have received higher natural gas bills following January’s extended ice storm and extreme cold.

According to GPU Superintendent David Kellogg, the increase is primarily due to two factors: significantly higher usage during the prolonged cold snap and a temporary rise in the market cost of natural gas.

“Customer usage increased roughly 40% during that period,” Kellogg said. “We experienced a week and a half to two weeks of below-freezing temperatures, which naturally increased heating demand.”

In addition to higher usage, the wholesale cost of natural gas rose sharply during the cold spell. GPU purchased natural gas for January at $4.4687 per dekatherm, compared to $3.514 per dekatherm in January of last year. For February, the market price rose to $7.46 per dekatherm.

Because natural gas is billed based on the monthly market rate at the time of billing, some January usage rolled into February statements and was billed at February’s higher rate.

Kellogg emphasized that this was not a rate increase.

“This was not a rate increase approved by the utility,” he said. “It was a rate adjustment based strictly on the actual cost of purchasing natural gas. That cost fluctuates every month depending on market conditions.”

During the peak of the cold snap, GPU exceeded its contracted supply due to unusually high demand and was required to purchase a small percentage of additional gas at elevated market prices to maintain system reliability.

GPU works with a third-party marketer that forecasts monthly usage based on historical data and weather projections. However, the extended duration of the recent freeze exceeded typical modeling assumptions.

Kellogg noted that prices also move downward. For March, GPU purchased natural gas at $2.97 per dekatherm, and customers should see lower costs reflected in upcoming bills.

While some utilities choose to lock in long-term gas contracts at fixed rates, that strategy carries risk if market prices fall significantly. GPU’s current purchasing strategy aims to balance stability with flexibility to take advantage of lower market pricing when available.

“Natural gas pricing is cyclical,” Kellogg said. “It goes up and it goes down. Most of the time it remains fairly stable, but extreme weather events can create short-term volatility. By purchasing gas at market prices instead of locking customers into long-term fixed contracts, we’re able to take advantage of lower prices when they occur, which ultimately saves money for our customers and taxpayers over time.”