Question-and-Answer Session
Operator
(Operator instructions) We will take our first question from Ted Durbin with Goldman Sachs.
Ted Durbin – Goldman Sachs
Hey guys, congratulations on a good quarter. I wanted to ask about the retail segment and maybe just a little bit more color on why you brought the guidance down by the $0.07, what are you seeing in terms of trends on the customer count side, on the margin side, et cetera. And I think Vince, you mentioned that actually a negative gross margin in the second quarter last year on the gas side and what you had -- maybe talk about what you had this year.
Harry Warren
Okay, this is Harry Warren. I think there's a few questions in there. Let me see if I can get all of them for you and if I miss one, please come back.
Ted Durbin – Goldman Sachs
Sure.
Harry Warren
One issue you brought up was the comment about the $0.07 per share reduction in guidance that had to do with the recognition of gas margins this summer. That one, now that will take a minute here to explain, so bear with me. What happens there is that WGES has allocated the use of utility storage to serve our firm gas customers and we withdraw that storage gas in the winter for those customers and we are also responsible for injecting gas into storage over the summer. So for various reasons, we sell part of that storage at index prices during the summer, the summer that's coming up in front of us. So, when market prices for gas are moving up, the cost of that storage fill and our projections of the cost of that storage fill for the rest of the summer are also going up.
When we compute our margins this summer, we use on the cost side, a weighted average cost of gas that includes all of that storage fill plus all of our other flowing gas supplies for the summer. So, when we see the market prices move up, it sort of compresses our margin recognition during the summer.
Now, we get that back in an offsetting benefit next year because when we are withdrawing the gas from storage next winter, that storage has been put in at that same blended inventory cost this summer so we wind up taking out some cheaper storage gas than we might otherwise next winter. So, that's why we say that we are sort of pushing some margin recognition out into next winter. So really the underlying results of the sales process and our margins haven't really changed. We just shifted some margin recognition.
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