Historical data of the Sugar Hill Gas System
While giving all customers a very competitive cost for gas and excellent service, the Sugar Hill Gas Utility is a major portion of the municipal budget. Its operation ensures that the tax millage rate is retained at the lowest possible level. The Gas System infrastructure had been neglected for many years resulting in less than adequate service (low pressure and periodic outages.) Three-four years ago, proactive actions were taken to increase the high-pressure lines to accommodate the growing demand of customers (9,600) and their needs. This is a 100% growth since January 1999. This corrective action is complete and has resulted in a superior service delivery system. Elected officials have set up a formula to determine consumer price; that price was very beneficial when natural gas prices were low. However, when gas prices increased significantly, the formula caused the cost to the customer to rise faster than the actual cost of gas. Last winter when gas prices spiked throughout the nation, the Mayor and Council took immediate action to reduce the cost of gas to its customers. The City is looking at pricing options to keep cost as low as practical and ensure uninterrupted service.
· Upgrades to system infrastructure were neglected for years resulting in loss of delivery capability during high demand.
· A system of high-pressure lines were installed to correct this problem.
The Municipal Gas Authority of Georgia (MGAG) notified the City of Sugar Hill that their "Total Bill" cost to customers was the least of all marketers in Georgia in the month of May. This total bill computation includes price of gas, service and fees and is the true cost of gas delivery and sales.
Improvements made during the last two years:
Replacement of 2-inch lines with 4-inch. Installation of almost seven (7) miles of new high-pressure or upgraded low-pressure lines and 6-inch steel high-pressure line from transfer station to Level Creek Road. These improvements improved service delivery. Hundreds of leaks have been detected and fixed resulting in a documented loss rate of less than 2%. This loss rate is considered excellent and among the best anywhere. These improvements improved service delivery. Hundreds of leaks have been detected and fixed resulting in a documented loss rate of less than 2%. This loss rate is considered excellent and among the best anywhere. Trends in the gas market: Demand for natural gas is increasing and cost fluctuate according to supply and demand. With the lack of growth of nuclear power electrical generation and the cost of petroleum increasing, natural gas is being used to fill the gap for production. Consultants expect the price of natural gas to fluctuate during the summer because of the availability and usage to generate electricity. Costs associated with the improvements needed for the upcoming winter: There are no known improvements specifically related to the upcoming winter season. The majority of work consists of hookups, cutoffs, fixing minor leaks and replacing old metal piping. We accomplish an annual audit of gas line continuity and are awaiting the report. First indications were that our system was "tight" with very few leaks detected. Many of those leaks were corrected on the spot and the remainders are being worked. The City's Gas Consultant has confirmed that our operational system is very healthy and required upgrade outlays over the next five (5) years is in the $200,000 range. We have plans to extend our high-pressure line for the next three years to support potential growth to the north of Highway 20. Both of these improvements will be part of a budgeted Gas Capital Improvement Fund. Ways to generate more customers/subdivisions with our gas system: Promote more development: annexations, rezoning for commercial and industrial. Positive aspects of the Hedging Program: Hedging is a way to purchase a portion of the City's gas requirement before the prices increase with demand in the colder months. By purchasing 80% of conservative consumption requirements, the city can ensure that its customers will not have to pay a higher season "market" price for natural gas by averaging market purchases with gas futures. How "hedging" works: Consumption for sample month: 1,000 gas units Hedging purchase of 700 units (70%) at $5.10 = $3,570 Market purchase of 300 units (30%) at $8.00 = $2,400 Cost averaging as a result of hedging = $3,570 + $2,400 = $5,970 / 1,000 = $5.97 per unit Cost if purchased at market price = $8,000 Savings per unit using hedging = $8,000 - $5,570 = $2,030 / 1,000 units = $2.03 The cost avoidance (savings) will vary monthly and will be determined by the hedged price, percentage of hedged units purchased compared to total customer demand and actual market price of gas. Summary: We believe the Sugar Hill Gas System is healthy, a great value and an essential service provided to its citizens and surrounding customers. Significant investment has been made to improve the system infrastructure and will be viable for years to come. Additional improvements will be required for continued customer growth and replacement of current infrastructure. These improvements will not require inordinate investment and should be part of a normal Capital Improvement Fund. After reviewing the system, I have determined that the system is healthy; customers receive quality service at a very competitive price and the proceeds of the gas system support all services provided to the citizens of Sugar Hill and are a good value for all of its customers. See the City Manager monthly report for current gas comparisons. Sugar Hill Gas Comparison |