Eighty must commit by May 9
Xcel Energy will bring natural gas lines to parts of northern Scandia by fall if enough residents in the affected area sign on the dotted line.
Faced with rising propane prices, in February rural homeowners approached the city for help in exploring the natural gas alternative.
Since then, Scandia’s recently created Economic Development Authority has held two meetings with Xcel representatives and residents.
Michael Mayerchak, Xcel account executive, and Colette Jurek, Xcel community relations manager, spoke to residents at the Economic Development Authority meeting on April 14.
Residents of parts of Olinda Trail, Oren Road, Oldfield Avenue, Ogilvie Avenue, 236th, 237th and 240th streets, Pilar Road, Paris Avenue and Perkins Avenue have until May 9 to decide whether they’d like Xcel Energy to bring a natural gas line to their homes.
If 80 homeowners sign on, Xcel promises to have gas to their furnaces by Nov. 1.
Xcel requires at least 80 new customers in order to offer a new area surcharge. The initial hookup fee for each customer is $4,550 plus the cost to extend the line from the road to the home. Xcel would receive $364,000 up front, and each customer would pay a surcharge of $25 per month ($300 per year) for the next 15 years. The number of years could decrease, Mayerchak said, if more homeowners join the plan.
Mayerchak showed cost examples for different driveway lengths and house sizes. Assuming a liquid propane price of $2.50 per gallon, a house using 1,100 gallons would spend $2,750 per year if heating with propane. The cost to convert to natural gas would be $4,550 to hook up, plus $1,132 if the distance from the road is 300 feet, plus $300 to convert appliances.
Adding $903 for natural gas to heat the house and the annual $300 surcharge, the first-year total would be $7,185.
Taking into account the savings in heating cost compared to propane, he concluded that this homeowner would see a payback period of four years. The bigger the house and the higher the price of propane, the quicker the payback.
If only 40 homeowners sign up, the project could still go forward if they are willing to pay double the hookup cost.
If a property sells after being converted to natural gas, he said, the new owner would be required to pay the $300 per year.
Mayerchak said the average price of propane for the past three years was $1.83 per gallon and is expected to increase to $2.75 in 2014.
Xcel’s prices for natural gas averaged 72 cents per therm in 2011, 61 cents in 2012, 66 cents in 2013 and 84 cents in 2014.
Factoring in the different amount of heat produced by the two fuels, Mayerchak concluded that natural gas is the cheaper heat source when propane goes above $1 per gallon.
Mayerchak said another Scandia neighborhood, on Nolan Avenue by Sea Lake, has decided to sign up for natural gas.