The burgeoning production of natural gas, which has North American energy companies seeking to export the fuel, could soon mean lower prices for Southern Oregon users.

The burgeoning production of natural gas, which has North American energy companies seeking to export the fuel, could soon mean lower prices for Southern Oregon users.

Avista said Thursday it is applying for a 10.7 percent decrease in its natural gas rates.

If the Oregon Public Utility Commission approves, the Spokane, Wash.-based company's annual Purchased Gas Cost Adjustment, monthly bills for its 96,000 customers in Douglas, Jackson, Josephine and Klamath counties — as well as the La Grande area in northeastern Oregon — will go down by an average of more than $6.

Such rate adjustments are filed annually to balance the actual cost of wholesale natural gas purchased by Avista with its billing. Abundant supplies of gas and flat demand have reduced wholesale prices over the past year.

"The amount of shale gas out there is certainly putting downward pressure on pricing," said Steve Harper, Avista's gas supply director. "With the increased production throughout the U.S., we're close to setting (industry) records every month in how much is coming out and it will help push prices down."

While little shale gas is produced in the Northwest, the new abundance is pushing gas into Western pipelines that used to go south and east.

"We get a lot from Canada, and even gas from the Rockies, that can go either east or west, is being pushed back to the Rockies, making more available here," Harper said.

When new wells are drilled — many using hydraulic fracturing or "fracking" technology — they produce both natural and liquid gas.

"Gas and oil prices have disconnected the last few years," Harper said. "The liquids are more closely aligned with oil prices, and they are sent down for processing in Texas.

"It's difficult to tell if we're at the bottom," Harper said. "There have been several things leading to lower prices — production of shale gas and storage being the biggest. I don't know if it can replicate itself next year. We're going to see it at lower than historical levels (in 2013), but I'm not sure if it will be lower than this year."

Residential customers in the region use 47 therms of gas per month, on average, and have been paying $660 annually for gas, said Steve Vincent, Avista's regional business manager.

He said many industrial and commercial natural gas users buy directly on the spot market. "Really big customers like Timber Products, Asante and Southern Oregon University buy their own gas and pay us to run it through our system," Vincent said.

A key component in the PUC filing is Avista's purchase of the Klamath Falls Lateral — a 15-mile, 6-inch transmission pipeline — owned and operated by Northwest Pipeline, which connects with Gas Transmission Northwest.

The acquisition is expected to reduce customer costs by $1 million annually.

"The pipeline is a resource that fits better in our hands because of its location," said Harper. "We have to pay a charge for everything we move on it — a fixed cost — whether we move gas or not and then pay for gas as well. We (will) avoid both of those costs."

If all of the requests are approved, Avista's natural gas revenues would decrease by $10 million, or 9.9 percent, in November, with an additional annual revenue decrease of $800,000, or 0.8 percent, starting Jan. 1. Combined, Avista's statewide revenue would decrease $10.8 million or 10.7 percent.

Avista earnings are not based on wholesale prices.

The costs of purchasing natural gas on the wholesale market and transporting it to Avista's system accounts for about 55 percent of a customer's charges.

The remaining 45 percent covers the cost of delivering the natural gas.

Reach reporter Greg Stiles at 541-776-4463 or email business@mailtribune.com.