February 17, 2021
The past week has been very difficult for all of us. A Polar Vortex has blanketed nearly the entire Unites States and most all the Midwest region. We have experienced unprecedented, record-setting temperatures that are driving natural gas prices to all-time highs.
Three primary factors are causing the increase in pricing: record temperatures, well-head freezing which bottlenecks extraction, and an increase in demand. Let me stress to you that natural gas is a commodity, and the price is driven by supply and demand, not by arbitrary numbers created by the city.
We estimate our gas usage on an annual basis and budget for that amount. This estimate is forecasted on a five-year history. After forecasted we nominate that total to our gas purchasing agency, the Kansas Municipal Gas Agency, to handle the purchasing and transportation of that gas to us. We purchase our forecasted number in thirds; one-third at a fixed price, one-third at a monthly price, and one-third at the daily spot price. That model is one that is typically used in the gas purchasing industry and has served us well over the last several years when gas pricing has been at historically low numbers. When we purchase the gas at either a locked in price, or the daily price, we add $2.75 per MCF to your monthly consumption number to cover the cost of service to keep our gas system in safe, operational order. That price has not gone up since 2013 although I am certain the cost of service has gone up.
I want to specifically address communication I have been made aware of regarding this crisis. The City of Hesston does not influence the price of natural gas and has not inflated costs to make additional money. That is simply absurd to think that we would inflate pricing, knowing full well of the impact it would have on our end-users, whether they be residential, business, or industry. We as the governing body, responsible for the well-being of our community, are residents as well and always work toward the highest good of our collective community.
Let me assure you that we have been in contact with state and federal leadership throughout this crisis and continue to have daily dialog regarding this matter. It was our pro-active approach and contact with our local leaders that led to Governor Kelly declaring a State of Emergency. Now, we are waiting for federal authorities to follow suit so we may potentially have an avenue of relief. However, I must stress to you that relief, if approved, will not come quickly. We will have to determine a way to address the issue at hand and await our opportunity to seek assistance. That could mean several months…to several years. There is no quick fix.
I know these are difficult times. We do not have all the answers yet. We are all having to make sacrifices to lower our total gas consumption. Some relief will soon come as temperatures rise and the price of gas lowers. For now, I am asking that you continue to take action to conserve as much as safely possible. Please do not endanger your life in doing so. As leaders, we will be meeting in the coming days to begin exploring our best steps forward to address the crisis at hand. We will continue to update the community through all our media outlets including our web site, Facebook posts, the Chamber of Commerce, The Hesston Record, and other outlets as made available to us. As we learn updates, we will communicate to you as quickly as possible. If you hear information regarding this crisis that you believe to be false or misleading, call the City Administrator, Gary Emry, at 620-327-4412 to confirm and/or discredit.
David K. Kauffman