How We Buy Our Gas
The City is a founding member of the National Public Gas Agency which is a group of cities that work together to purchase gas supplies in bulk to help secure competitive rates for its citizens. NPGA serves about 30 communities in 7 states. Central City has a permanent seat on the Board of Directors.
NPGA utilizes a variety of purchasing strategies to maintain reasonable rates.
The City has dedicated storage that allows gas to be purchased in the spring and summer months when gas is typically cheaper. This gas is drawn out of storage in the winter.
NPGA employs a "Level Purchase Plan" (LPP) in which gas contracts for the following 12 months are purchased on a pre-set volumetric schedule. These are contracts for future gas delivery at a set price. This allows a portion of the gas consumption to be purchased similar to a "dollar cost averaging" strategy. It recognizes that nobody can accurately predict future prices, so small quantities of future gas is purchased every month regardless of the price. This means this gas, when actually consumed, is never at the top or the bottom of the market. It's somewhere in the middle.
NPGA also purchases some gas on the "spot market". This means the gas is purchased when it's actually needed, whatever that price may be. This is necessary since weather drives the demand for gas and we can't predict the weather. If we over-purchase gas, we'll have too much when it comes time to actually use it.
We believe the employment of these 3 purchasing strategies assure our customer of a rate somewhere in the middle of the market over time. We did suspend the LPP program in the summer of 2008 during the natural gas and oil price spikes. We "caught up" with our purchases as prices came back down.
No purchasing strategy is perfect. Buying winter gas heavily in the spring looks smart when prices go up. It doesn't look smart when prices go down. For this reason, we employ different purchasing strategies to combine their effects, while still maintaining some discretion to speed up or slow down purchases when prices appear out of line.