New Jersey Natural Gas Seeks BPU Approval for Price Adjustment

WALL, N.J.--(BUSINESS WIRE)--New Jersey Natural Gas (NJNG) filed a request today with the New Jersey Board of Public Utilities (BPU) to adjust the price of its Basic Gas Supply Service (BGSS) for residential and small commercial customers. Reflecting the steady rise in wholesale natural gas prices in recent months, NJNG has requested a change that would result in an overall increase of 18 percent effective October 1, 2008. If approved, the change will not increase profits to the utility.

Over the past year, the 12-month average price of natural gas futures on the New York Mercantile Exchange (NYMEX) has increased 33 percent, rising from $8.612 per decatherm in May 2007 to $11.461 per decatherm in May 2008. As crude oil prices continue to climb, many industrial companies around the nation that have the ability to use multiple fuel sources have switched to more affordable natural gas. Additionally, the demand for cleaner, more efficient fuels is leading to an increase in natural gas usage, tightening the balance between supply and demand and driving wholesale costs upward. In recent weeks, commodity prices have hit their highest levels in over two years.

“We realize that many of our customers are dealing with the effects of an economic downturn and that rising energy costs are a major aspect of that,” said Mark Sperduto, vice president of regulatory affairs for NJNG. “We will continue to do everything we can to minimize the impact of the increase in natural gas costs and we encourage our customers do the same through conservation efforts.”

“The requested increased could have been as much as 13 percent more if NJNG had not already secured prices for nearly 60 percent of the natural gas supply needed for the upcoming heating season,” Sperduto added.

Using storage and financial hedging tools, the company locks in prices for natural gas during the spring and summer months, when prices are typically lower. By doing so, the company hedges against potential future increases in price and is able to request a price adjustment that is relatively lower than utilities in states that are not permitted to secure the price on their supply in advance.

“As wholesale natural gas costs fell from the record highs experienced after Hurricane Katrina, NJNG reduced customers’ bills by more than $212 million through numerous bill credits, refunds and price reductions,” said Sperduto. “With wholesale prices again rising rapidly, we stand ready, as we have demonstrated previously, to lower our customers’ natural gas costs if wholesale markets moderate in the coming months.”

Additionally, BPU-approved incentive programs allow NJNG and its customers to share utility gross margin earned according to utility gross margin-sharing formulas, helping to reduce price volatility. Since their inception in 1992, customers have saved over $360 million, or approximately 4 percent annually.

Customers’ natural gas bills consist of two separate charges. The first, known as the base rate, is the cost of delivering service to homes and businesses. The second, the BGSS, is a commodity charge passed through based on NJNG’s cost to acquire natural gas. This portion accounts for approximately 75 percent of a customer’s bill. Any increase in the BGSS does not represent an increase to profits to the company.

NJNG also filed a petition to adjust its Conservation Incentive Program (CIP) and Weather Normalization Clause (WNC) recovery rates, both components of the delivery charge, effective October 1, 2008; however, the changes to the WNC rate will offset the CIP rate on residential customers’ bills, and therefore the net result causes no change.

The best way for customers to manage their energy costs is by conserving energy. The CIP enables NJNG to more actively encourage customer conservation and energy efficiency improvements while stabilizing margins that might be impacted by changing usage patterns. In the 6-month period ended March 31, 2008, customers realized commodity cost savings of approximately $35.5 million due to their reduced natural gas usage. In addition, customers will continue to receive annual savings of $10.6 million in fixed-cost reductions as a result of lower demand fee charges.

Through Conserve to Preserve®, NJNG is providing tools and information to enable customers to reduce their energy bills and save money. The Conserve to Preserve Dashboard, available at njliving.com, can help customers to analyze their natural gas bills and understand why their bills may have changed each month. It will compare a home’s energy use to those of a similar size and style in the area. Additionally, through the Dashboard, customers can take the Home Energy Analysis offered by New Jersey’s Clean Energy Program. Business customers can enroll in Conserve to Preserve Business Online, which provides industry specific, energy-saving information and access to energy experts who can answer customer questions.

Many additional customer resources and special offers are available on njliving.com including energy-savings tips, information on energy-efficiency upgrades and energy assistance programs.

New Jersey Natural Gas (NJNG) is the principal subsidiary of New Jersey Resources (NYSE: NJR), a Fortune 1000 company. NJNG serves more than 482,000 customers in New Jersey’s Monmouth, Ocean, Middlesex and Morris counties. This service area’s demographics and quality of life contribute greatly to NJNG’s growth. NJNG’s progress is a tribute to the dedicated employees who have shared their expertise and focus on quality through more than 50 years of serving customers and the community to make the company a leader in the competitive energy marketplace. For more information, visit NJNG’s Web site at njliving.com.

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