Cost Savings Calculation

How is the cost savings calculated?

The cost savings calculation takes the annual gallons of propane used multiplied by the average cost per gallon to arrive at an annual cost for propane.

Given that each gallon of propane equates to 0.916 therms, the annual gallons of propane is multiplied by 0.916 to achieve a natural gas therm equivalence. For example, 800 gallons of propane is equal to approximately 733 therms of natural gas.

The calculation then uses the 733 therms and allocates it out by month based on a typical residential natural gas customer’s load profile. For example, a typical residential customer in MGE’s service territory uses approximately 18% of their annual consumption in the month of January.

2017 and 2018 natural gas prices along with any per therm surcharge are then multiplied by the typical residential customer’s monthly load profile. In addition, the calculation adds the 2018 daily customer charge to arrive at an estimated annual natural gas bill.

The estimated annual natural gas bill is then subtracted from the annual cost of propane to arrive at the estimated savings.