Columbia Gas Transmission Corp., the company that supplies natural gas to the Washington area, said yesterday it has taken steps to reduce the price it pays for gas.
The company said it will limit the price it pays for natural gas under new contracts and will attempt to negotiate lower prices for gas to be purchased under existing contracts.
Natural gas bills for Washington-area consumers are expected to be as much as 25 percent higher this winter, in part because of inflexible contracts requiring Columbia to buy relatively-high-cost gas. The so-called "take or pay" contracts were negotiated when companies feared gas shortages and locked in long-term supplies at prices that look too high now that demand has dropped and other energy costs are falling.
Among other measures, Columbia no longer will offer price-escalation clauses in new contracts, but will require that contracts be reviewed periodically.
W.W. Ferrell, chairman of Columbia Transmission, called the company's actions "an effort to slow down the rise in consumer energy costs and to help keep natural gas competitive with other sources of energy in the marketplace."
In other actions, the company will offer $4 per million BTUs for certain types of gas for which it now pays $5.42. The company also said it will offer a somewhat higher price for gas developed from new wells for producers who agree to renegotiate prices in existing contracts.
The company also is attempting to win a reduction in prices it pays for gas produced from wells deeper than 15,000 feet -- prices that are not federally regulated.
"While we can't predict what [the negotiations'] ultimate outcome will be, we want to make certain producers are fully aware of what is transpiring in the marketplace, the concerns our wholesale customers are expressing to us, and the impact higher prices are having on sales and consumers," Ferrell said.
The high costs of the gas that Columbia buys under existing contracts is passed on nearly automatically to consumers through by utility companies.