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What is a Purchased Gas Adjustment (PGA)

Each local natural gas company purchases gas for delivery to its core customers.  The cost of this gas is a “cost of doing business” for the gas company; it is not intended the company make any profit whatsoever from the purchases.  The gas company also makes investments, puts infrastructure in place, and employs people to deliver the gas it purchases to its core customers. 

The gas company is allowed to recover the cost of these investments and expenses in its rates approved by the Commission, along with a reasonable and prudent return on its investment.  However, a different approach is utilized to recover the company’s cost of purchased gas.  This cost is recovered through what is called a “purchased gas adjustment” (PGA). 

The PGA is a line item addition to all core customer bills covering the cost of purchased gas only.  The remainder of the bill reflects the expenses and return on investment for the gas company to deliver this gas to its core customers.  Each core customer pays the same annual rate for purchased gas on a per therm basis.  If there are unexpected increases in the cost of gas during the year or the company is required to purchase more gas than expected that additional cost is deferred for recovery during the next year.  Similarly, if gas cost during the year is less than expected, that savings is credited to core customers during the next year.  In addition, the Commission has instituted a sharing arrangement for Oregon gas companies regarding natural gas costs. 

Under this arrangement gas costs above or below the projected monthly cost per therm approved by the Commission in October each year are shared between the company and its core customers.  This is intended to provide an incentive to gas companies to minimize both gas cost and gas cost variability.  Annually the Commission reviews the gas costs proposed for recovery from core customers by each Oregon gas company both to ensure the costs are reasonable and prudent, and that the company has taken all actions available to it to keep these costs as low and stable as possible.  

If the PGA functions as designed each core customer pays only actual gas costs, with no mark-up or profit for the company.