Richmond's Department of Public Utilities wants to sign a long-term deal to buy gas that could save a typical homeowner $3.60 a month over the next 13 years.

DPU officials disclosed yesterday that the deal is a long-term contract to buy about one-fifth of the utility's gas needs at 50 cents per million British thermal units below market prices.

A million Btu is enough gas to bring 833 1-gallon pots of room-temperature water to a boil, and the deal would let the city buy 10,000 million Btu a day at that discount.

Last night, the Richmond City Council voted 9-0 to give the department a go-ahead to negotiate a contract.

Utilities Comptroller Wayne Lassiter said it is too soon to say whether the current charge for gas, now $1.075 per hundred cubic feet, will rise or fall. That price has been steady since November 2006, but wholesale prices are on the rise and now exceed where they stood at that time.

Lassiter said the discount -- which would be passed on dollar-for-dollar to consumers -- means customers' bills would be less than they would have been if the utilities department bought all its gas at market prices, as it does now. The savings would be about $3.60 a month for a customer using 7,000 cubic feet of gas, which is roughly what a typical house on the 12-month budget plan is charged for.

The proposed deal, details of which must still be worked out, would be with the Municipal Gas Authority of Georgia, an agency that buys large volumes of gas for cityor county-owned gas utilities such as Richmond's DPU.

At the heart of the deal is a swap between the Georgia agency and a major gas producer.

The Georgia agency -- which can issue tax-exempt, low-interest-rate debt -- borrowed money and lets the gas supplier invest the funds at a higher interest rate. The supplier keeps the difference between the Georgians' interest cost and its income. In return, the supplier agreed to sell gas to the Georgia agency at a discount, which the agency then resells at a discount to municipal gas companies.

Such deals were first put together in the 1990s, and rulings by the U.S. Treasury Department in 2003 and 2005 made them more attractive, Lassiter said.

Although some kinds of financial swaps have caused multibillion-dollar problems for banks and investment houses, Lassiter said DPU isn't at risk because it does not need to put in any upfront money.

Nor is the city promising to do anything except buy gas at a discount.

If the other parties can't live up to their promises, the worst that could happen to DPU is that the discount vanishes and the agency has to go back to buying all its gas at market prices, Lassiter said.

DPU serves 100,000 customers in the city and suburbs.
Contact David Ress at (804) 649-6051 or dress@timesdispatch.com.