TID board votes to seek contracts for low-priced natural gas

The board of the Turlock Irrigation District agreed Tuesday to take advantage of low prices for the natural gas that fuels some of its power plants.

TID will seek 10-year contracts that would lock in prices close to today’s, involving enough gas to meet up to 10 percent of current power demand.

The savings for ratepayers would be small if gas prices on the open market do not rise much over that decade, but much greater if they spike markedly.

The board voted 4-0, with director Rob Santos absent, to have the staff seek out gas sellers around the nation. Prices are about a quarter of their 2009 peak of $12.41 per 1,000 cubic feet because improved production has outstripped demand.

“I just think the timing is right,” General Manager Casey Hashimoto said.

Natural gas is the leading power source for the 101,000 or so customers in Turlock, Ceres, south Modesto, Patterson and several other locales. TID also has wind, hydroelectric, coal, geothermal and solar resources within its boundaries or in distant places.

Locking in gas at $3.50 per 1,000 cubic feet would mean an annual savings of about $900,000 if prices on the open market rise to $4.50 on average, said Willie Manuel, resource planning manager for TID. It would mean a loss of the same amount if the market offers gas for $2.50.

The figures are tiny compared with the $280 million in total power revenue this year, but TID leaders are looking for savings as they face a state mandate to boost renewable sources.

“I believe our ratepayers value stability more than they do volatility,” Director Michael Frantz said.

The district will still get much of its gas on the open market, which has swung widely over the past decade. The once-booming petroleum industry in the Great Plains has staggered under a glut resulting from advanced exploration and extraction methods. Dips in the economy reduced demand. And this past winter was the nation’s warmest on record, resulting in less gas burned to heat homes.

This story was originally published April 19, 2016 at 3:10 PM with the headline "TID board votes to seek contracts for low-priced natural gas."