Natural Gas

In the winter of 2004, natural gas bills skyrocketed in many Arizona rural communities. The natural gas provider, Unisource Gas, had to buy natural gas at historically high prices. On top of this, the sales tax consumers pay made the total cost even higher. High sales taxes (more than 11%), tacked on to the already high cost of natural gas, were yielding a revenue windfall to state and local governments. "High taxes on top of high natural gas prices is not only unjustified, but it made it nearly impossible for those on low and fixed incomes to heat their homes this past winter," declared Hatch-Miller.

Hatch-Miller first proposed a tax moratorium to alleviate the burdensome cost to ratepayers. He then approached the Arizona Legislature to establish a special task force to find a fairer way to tax natural gas consumption. Under the current method, the sales tax on natural gas is calculated on the price of the gas. As the price increases, so does the amount of the sales tax. A better way, which is more equitable and predictable for consumers, is to establish a flat rate based on the consumption, rather than the cost, of natural gas. The special task force will deliver its recommendations to the Legislature later this year.

To provide immediate help, Hatch-Miller negotiated with Unisource Gas, arranging for vastly increased utility company donations to those community assistance programs where low and fixed income Arizonans can obtain help in paying natural gas bills.

"The bottom line is we need more natural gas," Hatch-Miller declared at a recent meeting. "Our supply of natural gas soon won't meet our needs. It's going to take swift, strong, decisive action to bring new supplies to Arizona." Virtually all of Arizona's natural gas supplies are provided by the El Paso Natural Gas pipeline. Because of a recent federal action, California now has the ability to draw a greater share from the El Paso pipeline, leaving Arizona in a vulnerable position. No natural gas storage exists in Arizona. With new natural-gas fired power plants being built, demand for natural gas has climbed rapidly. Unfortunately, while natural gas is a clean burning fuel, its price is highly volatile.

With limited availability but greater demand, Arizona is at the whim of the natural gas market. In early 2003, Hatch-Miller asked his fellow Commissioners to start a process to jump start development of a new natural gas pipeline and storage facility. The Commission later approved a policy statement that encourages the development of much-needed natural gas infrastructure.

The Commission's policy has already yielded results. In June 2004, the Commission approved Southwest Gas' request to recover prudent costs associated with a proposed new natural gas pipeline in Arizona. Kinder Morgan is proposing to build the Silver Canyon Pipeline which could significantly increase our supply of natural gas.