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Friday, February 13, 2009

Not everybody's crying

The fat cats at the gas company got quite a present from Santa this year.

Comments (9)

The price increases last year weren't rolled back when the wholesale rates fell late in the year, as you noted here. Until we have a more arms-length approach from regulatory authorities, I think the situation will continue.

Lets see, stock price down on news of 12% increase in 4th quarter earnings.

No mention in article of officers' or directors' salaries or bonuses.

I know I'm missing somerthing -- and I'm one of the folks with a rope looking to hang the former head of Merrill Lynch, for example - but I don't see anything in this article which suggests "fat cats" .

Help me out.

Heard an interview with a guy who runs a gas company. He claims that they have throttled back the refineries to force gas prices back up even with oil falling. Again, according to him they want gas prices in the 2.05 to 2.10/gallon range for their profit margin.

The way Oregon regulation works, the gas utilities' earnings can go up when customers use more energy (and down when customers use less). That's because the majority of utiltiy costs (except for gas commodity itself) are fixed, but the costs are recovered on a "per unit sold" basis. So, if more is sold due to cold weather, they may collect more than the average the utility commission estimated they would when the rates were set and earnings go up. They also collect less than the average the utility commission estimates when weather is warm. And then earnings go down. No one complains when earnings go down.

If you don't like this, you can sign up for NW Natural's WARM program and pay for the fixed costs you impose on the system, and only those fixed costs, regardless of how much or lttle natural gas you use.

You'll always pay for the exact commodity cost of gas, which they flow through to you at their cost of acquiring it in the commodity market. The local gas utilities have no control over the world commodity price of natural gas.

Guess I should add, Darrin, that the natural gas you buy from your local gas utility is only indirectly related to the gasoline you pay for at the pump. Gasoline prices may go up if producers/refiners limit output to tilt the supply/demand basis.

But the story was about natural gas.

We're pretty much stuck because our Portland utilities are all privately owned, monopology, for profit businesses. I don't know why PGE and Pacific Power even bother to advertise. It's not as if I could "switch" to Pacific Power if I didn't like PGE's rates. And NW Natural is the only gas game in town.

^That always puzzled me too!

On my 1/15/09 bill I saved a whopping $2.89 on a $327.44 bill through the "Warm" program. I paid $1.81 MORE on my December bill for a $236.42 bill.

The program doesn't seem to make a heck of a difference...

Utilities are regulated monopolies, and they are regulated for a reason. Read "Everything for Sale" by Robert Kuttner. It is about the history, and successes and failures, of the deregulation impulse since the 1970s. Many of the same deregulatory efforts that are afflicting us today in the financial markets were also tried in other markets. Utilities were the last to come under public pressure to deregulate, and it was a disaster. Remember the energy crisis of 2000-01? Right now, most states are slowly moving back to tighter regulation. The OPUC does a good job for Oregon customers.

But Frank, thanks for that info on the WARM program. I'm signed up for it too but "frankly" paid no attention to its effect on my bills.

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