Information for our gas | Village of Riverton

Information for our gas

3/8/2021

Through IMGA aka (Interstate Municipal Gas Agency), the Village of Riverton purchases natural gas. The Village has pre-purchased 75% of our natural gas requirements at approximately $2.75-$3.00 per dekatherm for our winter months. When our daily usage is projected to exceed our pre-purchased amount, we purchase the additional gas we require through the open market. Recently that market price has been in the $3.00-$3.50 per dekatherm price range. Each day, we purchase the additional natural gas that we project we will require for the next day.
On February 12, 2021 our IMGA Rep notified us of gas prices that had skyrocketed on afternoon trading and that Panhandle Pipeline was imposing hourly restrictions due to incoming winter weather going deep into Texas. That Friday, natural gas prices surged to over $600 per dekatherm before closing the day at $225 per dekatherm. Our price went from an average of $3 a dekatherm to $225 a dekatherm. This is a 7500% increase. Two factors combined to create a crisis for the Village. First, this was a holiday weekend and the Village needed to purchase enough gas to supply the Village for 4 days until the market opened back up for the next trading day. Failure to purchase enough natural gas for those 4 days would result in severe penalties to the Village. Secondly, the weather forecast for the next 4 days projected the coldest weather we would see all winter which would increase the demand on our natural gas usage.
Mayor Tom Rader called for a special meeting at 5:30 p.m. that night to inform the board that on February 13, 2021 our prices would be at $225 for the next 4 days. If we didn't buy our gas today, we would be paying that price plus penalties over the next several days, The board then took action by alerting the public through press releases and social media. We encouraged the residents to conserve energy and reduce their natural gas usage until such time as the market returned to normal. We also felt the residents needed to be aware that natural gas prices had increased significantly and would result in higher than normal natural gas charges. In addition, we began contacting our state and federal representatives to ask for help. This crisis was not just affecting Riverton, it had a negative impact on several communities throughout Illinois. We asked our elected representatives for any available assistance that might be available to pay for the higher natural gas prices. We also asked them to initiate an investigation into what really caused the egregious price increase. Was the price increase truly warranted or was the market price and gas pipeline restrictions being used to manipulate the market price? We felt this price increase constituted price gouging and warranted investigations by state and federal agencies. We encouraged our citizens to also contact our state and federal representatives. We have heard from those representatives that they received several phone calls and emails regarding the spike in natural gas prices. Thanks for those efforts because it let those representatives know how important this problem in in Riverton and throughout Illinois.
By February 20th, natural gas prices had returned to the normal price range of $3 per dekatherm. We do have to give credit to our residents for their energy conservation efforts. Although the weather got colder, our consumption maintained a steady level and prevented the Village from getting any penalties. However the damage was done and now we needed to work on a solution of how to pay the natural gas bill. We needed a solution that was manageable for the Village and our residents. With the pandemic and the current economy, we knew the citizens could not afford for the entire gas charge to be placed on a bill payable within 30 days.
Within a few days, the Governor issued a proclamation declaring Illinois a disaster area caused by the natural gas prices. This action allowed state agencies to start working on how to provide relief for those cities, towns, and villages that were adversely affected. The state proclamation is also the first step in possibly getting federal assistance. US Representatives LaHood and Davis requested that FERC aka (Federal Energy Regulatory Commission) initiate an investigation into the price increase. They have also requested that Congress consider a supplemental appropriation that would provide reimbursement to those cities affected.
Near the end of February, we started to get a better picture of how the price increase directly affected Riverton. Normally for an entire year, we spend around $950,000 for natural gas. We were told that our bill for February would be approximately $863,000 with $726,000 of that amount directly attributed to those 7 days. This is definitely a financial crisis for Riverton and we would not have the funds to pay the bill when it came due on March 20th.
As a result of the disaster proclamation from the Governor, Riverton was told that the Illinois Finance Authority would provide low interest loans to pay the natural gas bill and prevent default. The loan would be a simple interest loan and would have to be paid back to the state within 36 months. We are in the process of completing the loan process. In fact, we will take action tonight to give the Village President authority to enter into a loan agreement with the state.
Principal and interest for the loan is $733,607.58 payable in 36 months. This represents a monthly payment of $20,377.99. Now came the problem of figuring out how to pay that loan payment. We came up with 2 solutions. The choice was to charge by dekatherm for the next 36 months which would cause gas bills to fluctuate month to month based on gas prices and usage or to institute a per meter charge that would generate the funds needed. We felt it was important to have a known monthly charge as opposed to constantly changing rates. We recognized that any solution we picked would not be 100% fair to 100% of the people. So, we worked to come up with a solution that was fair to as many people as possible.
The solution that has been proposed is a $10-$13 per month increase in the meter charge to each residential home, $25-50 per month charge for commercial customers and $100 per month charge for the 25 biggest gas users. These increased meter charges would be for a period not to exceed 36 months. If we receive any kind of relief from FERC or Congress, those monies will be used to pay the loan off sooner. The extra meter charge will only be collected until the Village has collected enough funds to pay the state loan and then the meter charge will revert back to the normal price.
We know it may not be fair to those residents but again, there is no way to be 100% fair to 100% of the residents and we must take action that will be serve the entire Village. The terms of the loan are very specific that some rate increase must be passed on to the customers in order to guarantee the Village can pay the loan.
The purpose of this meeting tonight is to have a public hearing so that you the citizens can hear directly from the Village Board on the details of the natural gas crisis. We know rumors have circulated on what impact this will have on our citizens. We want to give you the facts so you can understand we have spent much time and effort working on a viable solution. We have not locked in our decision but we will have to take action at our March 15th meeting in order to start the process of setting the path forward on paying the state loan. If you have any questions or concerns, please let us know.