ADRIAN — Although Citizens Gas Fuel Co. is increasing its distribution fees for the first time in 14 years, Adrian-area residents will actually see lower rates on their gas bills this winter due to a decrease in the price of natural gas.

Joe Lucey, accounting manager at Citizens Gas, spoke to the Adrian City Commission at a study session on Nov. 20. He explained that Citizens Gas bills are made up of three pieces: the cost of the gas itself, which is passed straight through to customers with no markup, and the distribution fee and customer fee, which are used to support the company’s operations and maintain the distribution system.

Lucey said the last time Citizens requested a change in the distribution and customer fees was in late 2009. Since then, he said, the company was able to keep that fee the same for 14 years due to factors that included lower interest rates and more senior and higher-paid employees retiring and being replaced by people lower on the pay scale.

However, to keep pace with more recent increases in the cost of wages and benefits, as well as the cost of keeping up with regulatory requirements, he said the company is now requesting a hike in that fee.

On the table is an increase in two phases. The first phase would go into effect immediately and would result in an increase of $41 per year to the distribution and customer fees paid by the average residential customer, and $119 per year to the fees paid by the average commercial customer.

The second phase would go into effect after a new 8-inch pipeline is in service and would increase distribution and customer fees by an additional $15 per year for the average residential customer and $55 per year for the average commercial customer. Completion of that project is anticipated in fall 2025, according to a summary provided to the city commission.

However, residents will actually see the total rate on their gas bills go down this winter. That’s because the gas supply cost is decreasing by 34%. The gas supply cost is determined every year, based on what Citizens Gas paid during the past year and anticipates paying in the coming year, and is calculated so that, ultimately, the company neither makes nor loses money on the gas itself, and customers end up paying the same amount that Citizens paid.

Once the decrease in supply cost is taken into account, Lucey said, residential customers should see an average decrease of $311 per year in their gas bills, and commercial customers should see an average decrease of $1,384.

Lucey noted that those calculations are based on typical weather conditions.

Changes in the distribution fee must be approved by a two-person rate commission, which consists of the city administrator and a representative from Citizens Gas. This means, in effect, that the city’s permission is required in order for any increases to take effect. City administrator Greg Elliott, acting on the city commission’s behalf, agreed to the first phase on Nov. 28, and the new rates are going into effect with December bills.

The second phase will not be submitted for approval until the infrastructure upgrades are complete.

Citizens Gas is a subsidiary of DTE Energy and has about 17,800 customers in Lenawee County. Under Citizens’ franchise agreements with other local governments in Lenawee County, rates for those areas will follow the city’s rates.