Doug Little
Commissioner
Boyd Dunn
Commissioner
Tom Forese
Chairman
Andy Tobin
Commissioner
Bob Burns
Commissioner

 

 

         

Utilities Division

Purchased Gas Adjustor (PGA)
Frequently Asked Questions

What is the Purchased Gas Adjustor (PGA) & How Does It Work?

When you pay your gas bill, you are paying for the gas you use, plus the costs of transporting it and delivering it safely to your home or workplace. Natural gas is traded on the commodity markets and prices cycle from highs to lows like other commodities such as oil, coal or gold. To help even out the natural highs and lows in gas prices, the Arizona Corporation Commission permits companies to use a mathematical formula called the Purchased Gas Adjustor or PGA.

 

The PGA mechanism adjusts monthly to reflect changes in Gas Company's average cost of natural gas over the previous 12 months. The PGA cost reflects the difference between the base cost of gas (already built into the gas company's gas usage rates) and the company's actual cost of the natural gas commodity. The Commission monitors each gas company's PGA balance to ensure that the company is not over- or under-collecting.

 

It is important to note that gas companies are not allowed to make a profit on the cost of natural gas. You pay the gas company for the fuel you use on a dollar-for-dollar basis. The gas company earns a rate of return based on the costs of delivering gas to customers. The cost of putting the pipe in the ground, maintaining the meters, having crews available to respond at a moment's notice to an emergency, training and all other expenses are examined during a rate case.

Although the terminology on your bill may differ, depending on your utility, your charges generally fall into these categories. They are:

 

Gas Usage: This represents the cost per therm of gas you use. These rates are set by the Arizona Corporation Commission after we examine all of the company's costs of providing service. A portion of this rate reflects what the Commission determined was the cost of purchasing gas at the time the rate was set.

 

Basic Service Charge: This is a flat monthly fee representing some of the fixed costs that go into making gas available at your home of business, regardless of your usage, the time of year or market prices.

 

Rate Adjustment: This is a surcharge that covers costs associated with certain residential conservation and low-income programs. The ACC limits how much the surcharge can be adjusted up or down each month.

 

Purchased Gas Adjustor: The PGA cost reflects the difference between the base cost of gas (already built into the gas company's gas usage rates) and the company's actual cost of the natural gas commodity. See above for more details.

 

Monthly Gas Cost Adjustment: While the rate adjustment surcharge deals with past costs, the monthly gas cost adjustment adjusts up or down to reflect the difference between current supplier prices and the gas usage rate.

 

 

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