Frequently Asked Questions About Columbia Gas'
Consumer Brochures

WEATHER NORMALIZATION ADJUSTMENT

What is the Weather Normalization Adjustment (WNA)?

WNA is a mathematical formula which adjusts customers' monthly bills from December through April to reflect normal weather patterns based upon the 30-year average temperature for each billing period, lowering bills during periods of colder than normal weather and raising them during warmer than normal periods. You see either a positive or negative adjustment on your Columbia Gas bill for each winter month, depending upon how warm or cold the weather was compared to the normal temperature range during that billing period. Over time, the positive and negative adjustments should equal out.

Is WNA a new fee?

No, it is not. All Columbia Gas customers receive utility bills that are calculated using a WNA, even though it is not shown on all bills as separate item. Whenever a gas or electric utility asks the Public Service Commission (PSC) for a rate increase, the company's revenue requirement for the coming years is calculated by determining the expenses the company incurred in a recent historical test year. An adjustment is made to "normalize" the utility's revenues and expenses in the test year based upon the weather experienced during what is considered a normal year. In this way, WNA helps to establish the base rate you pay for utility service each time your rate is changed, but you do not see it as a separate charge or credit. The "normal vs. actual" adjustment on your gas bill is simply a method of allowing the company to directly account for the WNA each month, rather than going through the costly and time consuming process of filing for a rate change with the PSC whenever the temperature during the winter heating season varies from normal. Since implementation of the WNA in December 1993, Columbia Gas has only been granted one distribution rate increase in October 1995. While Columbia Gas is the only gas utility in Maryland that currently uses monthly WNA billing, the two other large gas utilities use a revenue normalization adjustment that modifies the customer’s monthly billing in a manner similar to the WNA.

Who benefits from WNA billing?

Both the gas utility and its customers benefit. Gas companies are required to hire employees and invest in plants and other facilities to meet the needs of their customers. The company recovers its costs through the distribution charges that appear on the customers’ bills. There is no markup in the gas supply charges billed by the company. Therefore, a warm winter can cause serious financial difficulty for gas utility companies hurt by declining sales because they may not be earning enough income through the distribution charges to cover fixed expenses. Because utility companies' rates are regulated, they cannot just raise their rates for distribution to cover their continuing cost obligations whenever home heating use declines. The PSC allows Columbia Gas to bill the WNA during winter months to allow it to quickly recover any revenue shortfall that might result from unusually warm winter weather. An additional charge will appear on your bill whenever the weather is unusually warm and Columbia Gas isn't delivering as much gas. WNA works the other way, too. During times of high demand for natural gas, you pay less for gas delivery. The program is designed to help the gas companies maintain a consistent revenue stream, so when there's low demand they don't see their earnings dive. Consumers benefit because when there's high demand, they don't see their bills skyrocket. The WNA counteracts the effects of higher or lower gas commodity costs with a lower or higher delivery charge. The net effect is that the WNA dampens the volatility of higher or lower gas charges during the winter season.

How is the WNA calculated?

The formula and an explanation of how to calculate WNA are shown below:

WNA = [(A - B) / ADD] x (NDD - ADD)

WNA: Weather Normalization Adjustment

A: actual ccf of gas used during billing period (a ccf represents approximately 100 cubic feet of natural gas)

B: average base load ccf of gas (gas used for activities other than heating, such as cooking)

ADD: Actual Degree Days is obtained by using the following formula:

{65 - [(avg. high temp. + avg. low temp.) / 2]} x # of days in billing period

NDD: Normal Degree Days

Using the above formulas, suppose the average daily high temperature during the most recent 30 day billing period was 45º and the average low was 25º, and National Oceanic and Air Administration (NOAA) says the NDD during that period was 1,000. You used 200 ccf of gas and your average base load is 20 ccf. First, calculate ADD as follows:

ADD = {65 - [(45 + 25) / 2] }x 30

= {65 - [70 / 2]} x 30
= {65 - 35} x 30
= 30 x 30
= 900

Then, use the formula to calculate WNA as follows:

WNA = [(200 - 20) / 900] x (1,000 - 900)*

= [180 / 900] x 100
= .2 x 100
= 20*

Add 20 ccf to the 200 ccf of gas you actually used to adjust the amount of your gas delivery charge.

Please note: Your gas bill is divided into separate charges for gas commodity (the cost of the gas itself) and gas distribution (the charge to deliver the gas). WNA applies only to the distribution charge. No adjustment is made to the commodity charge from the use of the WNA.

 

Maryland Public Service Commission
OFFICE OF EXTERNAL RELATIONS
6 St. Paul Street Baltimore, MD 21202
(800) 492-0474 in MD or (410) 767-8028

 

Revised 3/15/07