The Friday prior to Valentine’s Day, the city of Perryville was notified its natural gas supply would be impacted by colder weather. Natural gas pipelines implemented restrictions to maintain operational capacity and the city urged customers to conserve gas usage.
City administrator Brent Buerck provided the Perryville Board of Aldermen an update on the situation at a Feb. 16 meeting.
“It could be worse, and, for some folks, unfortunately, it is,” Buerck said, referring to other parts of Missouri, Illinois and down south.
Initially, it was reported the purchase price could be 60 to 70 times higher than normal.
The city purchases gas from Natural Gas Pipeline Company of America, which has four separate locations. The dekatherm cost ranged from $13 to $206 from Feb. 10-16. Perryville was part of the TexOK division, and got its supply at $13 a dekatherm. A dekatherm is a unit of measurement, primary to measure natural gas.
“It’s certainly not what we had hoped it would be for us, but there are a lot of places that are struggling with it way worse, with way higher rates,” Buerck said.
The gas is distributed by pipeline to a take point on the east side of U.S. Highway 61, north of Fruitland.
The city locks in close to 50 percent of its natural gas purchases ahead of time, according to Buerck.
For this year, it was $2.84 per dekatherm, and that price is locked in through 2024. The city has a daily use of 6,475 dekatherms per day.
“We look to lock in gas prices in winter strips,” Buerck said, adding 50 percent is locked in through the winter of 2023-24 at $2.84. We always try to get below $3 per dekatherm. There is an argument to be made to lock in more gas than that and we can as we get closer. The challenge is being careful not to buy gas you don’t need or having to sell unused gas back at a lower price.”
For the rest of the natural gas supply, it allows for a natural “ebb and flow” of the market, according to Buerck.
The city’s buyer looks historically at typical February usage and purchases more 60 percent.
The remaining 40 percent is gas used outside of a normal February day, Buerck said. Anything over the first 60 percent is about $13 (per dekatherm).
“The more guarantee we want, the higher we have to pay for it, so that’s what we’re paying for now.”
Buerck said for any usage in excess of 6,475 dekatherms, the city is required to pay market price, plus penalties.
“We can buy a higher maximum daily quantity, but it comes at a significant cost,” Buerck said. “We’ve never had this kind of incident this bad before, but you have to pay for that quantity every time.”
The additional quantity allotted for may not be needed in certain years, Buerck said.
There’s also a maximum hourly amount. This is determined by taking the total usage divided by 24 hours, leaving about 280 decatherms, though this is increased to 120 percent, putting the maximum per hour at 323 dekatherms. This was later revised to 296 per hour, Buerck noted.
“As of yesterday afternoon, (Feb. 15) we had been able to meet both limits the entire time,” Buerck said. “That’s a testament not only to our industries that had to cut back but also to our residents that really some adjustments in this cold weather. We may a little bit more for this option but it provides some certainty. It’s easier to predict when we know exactly what we’re going to pay. It keeps the line flatter.
Buerck said the penalty amount for going over is not known at this time.
“We’re trying to get a price certainty within a pretty narrow range, and it’s worked well for us most years.”
The city has ranged from purchasing 35-85 percent of its natural gas supply at a predetermined, lock-in rate.
“We’ve been shooting for $3, and we’ve been getting it with great success,” Buerck said. “We still have several years locked in.”
The more we lock in a price, we’re locking in a promise that we’re going to buy that stuff
Buerck said 2014 was the last time this was an issue.
“It made more sense to pay an occasional penalty, than it did to buy that extra gas and pay for it every time even when we didn’t need it. What made it different this time is that is was more widespread.”
During the recent cold spell, temperatures in certain places of Texas and Mississippi were lower than in Alaska.
“We’ve been asking folks to reduce their usage,” Buerck said. “Thus far, I know they haven’t been happy about it, but it’s making a big impact.”
The city is working on a master plan to determine proper maximum daily quantity, Buerck said.
Alderman Larry Riney asked if the city planned to keep the Perry Park Center at reduced temperatures. This was the case both at city hall and the Perry Park Center.
“The gymnasium, we probably dropped to an uncomfortable level,” Buerck said.
Gilster Mary Lee and T.G. Missouri reduced production and Buerck said TG was cutting back as well.
“They’re doing what they can to keep it down,” Buerck said. “When we got the call Friday (Feb. 12), we were on pace to go above 500 decatherm per day.”
With a cost of $225 per decatherm, that’s the equivelant of paying $3,000 to fill up your car.
The city spends $7 million worth of fuel in a year on natural gas and, at that price point, was project to spend $2.2 million from Feb. 12-15.
“We avoided all that based on the hard work of our people, but we’re not done yet. It’s still going to get cold, it’s still coming but we weathered (the storm).”
Scott Sattler, executive director of Perry County Economic Development Authority, said the Catalyst Center for Business reduced temperatures to less than 60 degrees.
“We’ve reduced down to 55 (degrees),” Sattler said. “Because of the weather, most of our events have been cancelled, so most of the staff is working from home or going in briefly.”
The natural gas situation prompted Perry County District No. 32 to cancel in-person learning for Monday, Feb. 22.
“In the nine years I’ve worked at school, we’ve not had to close because of heat issues,” said Kate Martin, communications director for District 32. “We have, of course, had winters during which various heat systems malfunctioned. Each of those times, we have been able to move student populations to areas that were adequately heated. Monday was a bit different and the lack of heat did play a role in the decision to cancel in-person learning, along with county road conditions and the price of natural gas. Several areas were affected at the same time, particularly the Grade 4/5 wing of the elementary school and the middle school band and chorus areas. Parts for repairs were ordered on Friday and were scheduled to arrive Monday and Tuesday, but not in time to get the affected areas to a reasonable temperature to resume classes Monday morning.”
The ongoing pandemic also played a role in the school district’s response.
“In a normal year, we would have moved student populations, perhaps combining classes in gymnasiums or cafeterias,” Martin said. “That’s not safe for students and staff during the pandemic. Even if we weren’t in a pandemic, the natural gas conservation measures we’d taken meant that the gymnasiums and cafeterias were very chilly. We’d lowered the temperatures to those areas to about 50 degrees to support the conservation effort and wisely manage taxpayer dollars.”
“We only had a single day exceed our capacity limits and that was by only one decatherm,” Buerck said. “We could never have done that without the support of the businesses and residents. Unfortunately, we were told some businesses did shut down completely while others worked hard to reduce usage. It also helped that it happened during a time when the schools were not in session, which also helped save a considerable amount of gas.