Why is my natural gas so cheap?


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Old 11-17-09, 06:23 AM
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Why is my natural gas so cheap?

There are a couple gas suppliers for towns around here. That is it. Why don't they charge what they were getting during the high charge period of when oil cost the most? Right now, considering inflation, my gas is the cheapest I can remember in 24 years of being their customer. My last bil was only 66/therm. And at a facility I work at that has a different supplier the last bill was under 50/therm!

Is there a federal guideline they have to follow that pertains to markup above their cost, or something?

..........................................................................

What kills me are the ads for those electric space heaters they hail as some miracle where they claim the cost of fuels are skyrocketing. Right now, that is false advertising.
 
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Old 11-17-09, 06:40 AM
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Gas prices were "deregulated" years ago. Now there is a supplier to local facility. The local facility is responsible for the delivery through the local lines, services, promotions and pricing to cover what they provide and advertise.

At one time there were also (and still may be) companies that offered lower pricing, but the services provided in the case of outages and re-lighting, etc. they lost favor.

Often the pricing is controlled by the local municipality that also has some service or technial assistance and can easily read meters.

This is all from memory since I have not shopped for gas or been involved in the process for years.

Personally, my gas bill in the warm months has a connection and service charge greater then the usuage charge (hot water heater). In the coldest months my total gas bill (heat & hot water) for my 1400 sf 2 story townhouse has never been over $95.00/month and only close for 3 months.

Dick
 
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Old 11-17-09, 07:57 AM
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Natural gas prices are a bit cheaper than last year, due a mild winter last year and a mild summer. But at least around here, no way is natural gas as cheap as it was 24 years ago! Look for natural gas prices to rise, as opposition to any new coal fired electrical generation is forcing utilities to build new natural gas fired generating facilities, which will reduce the amount of gas available for the heating season.

As Concretemasonry said, natural gas production costs have been deregulated. The utility selling your gas, however, is likely regulated under your state's corporation commission. Most public utilities are regulated as to the amount of profit they may make. However, they are allowed to pass along to the customer the full cost of the natural gas that they purchase, and those costs are at the mercy of the unregulated gas producers. So if you're receiving cheap natural gas now, enjoy it while it lasts, as all energy costs are bound to rise as worldwide competition for energy intensifies. In addition, new restrictions on powerplant emissions will affect all energy prices.
 
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Old 11-17-09, 04:09 PM
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Originally Posted by Concretemasonry View Post
Gas prices were "deregulated" years ago. Now there is a supplier to local facility. The local facility is responsible for the delivery through the local lines, services, promotions and pricing to cover what they provide and advertise.
The bills are made out to WE Energies (used to be called Wisconsin Gas Co.), or another one locally is Xcel Energy. So, you refer to a supplier and also the local facility. Are you saying these 2 companies are not the supplier but rather the facility? Or both? Or what?

At one time there were also (and still may be) companies that offered lower pricing, but the services provided in the case of outages and re-lighting, etc. they lost favor.
I never heard of any company say undercutting the company that is providing the entire service in some locale. They lost favor, how?

Often the pricing is controlled by the local municipality that also has some service or technial assistance and can easily read meters.
The municipality controls prices?, rather than the gas company? I can see maybe the State or Feds with some say-so. But a local municipality? I never heard of that one before. I guess I have to take your word for it.
 
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Old 11-17-09, 04:14 PM
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Originally Posted by Beachboy View Post
But at least around here, no way is natural gas as cheap as it was 24 years ago!
What was it 24 years ago and what is it now?

Most public utilities are regulated as to the amount of profit they may make. However, they are allowed to pass along to the customer the full cost of the natural gas that they purchase, and those costs are at the mercy of the unregulated gas producers.[/QUOTE]

Huh. That's a good one. So the State regulates one and not the other? What is the reasoning behind THAT one?
 
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Old 11-17-09, 06:30 PM
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ecman -

Both WE Energies and excel buy the gas from a pipeline supplier, since they do not have a pipeline to the source.

You can call them the local facility or the local supplier responsible for service, maintenance , maintenace after a possible outage and for selling or enticing the customers to use gas. They are also responsible for the local distribution network, meter reading and billing.

In some areas the local municipality took over the distribution system and became the local/facility/supplier and is supposed to do what the private companies do.

I buy my gas from Xcel Energy (previously NSP), but not my electricity like people a mile south of me in a different suburb. I buy my electricity from Connexus, which owns the distribution system (virtually 100% buried thankfully). I buy my water from the suburb, which gets it from the City of St. Paul system, but some suburbs have their own wells and have to put up with the minerals from well water. Our water comes through a chain of preserved and controlled lakes that is treated by the St. Paul plant. the local control gives them the right, authority and control the use of sprinkling controls if necessary.

There is no one answer that fits all areas except that there is generally a difference between the major supplier (pipeline) and the local facility/distributor that owns the locally installed distribution facilities and must maintain them.

We never see a meter reader since they just drive around slowly and read the meters remotely and electronically, so that is a big cost savings.

Dick
 
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Old 11-18-09, 08:00 AM
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Originally Posted by ecman51` View Post
The municipality controls prices?, rather than the gas company? I can see maybe the State or Feds with some say-so. But a local municipality? I never heard of that one before. I guess I have to take your word for it.
At least around here, many towns own their own distribution systems and buy natural gas wholesale from the utility company. At least in this state, municipally owned utilities are not governed by the state corporation commission and may charge whatever they want to for the utilities they provide. Many municipal utilities charge much more than if service was provided by a utility company, but locals are reluctant to change the situation, as they want to keep control of their utilities "local", despite paying higher costs. Many municipal utilities use their utility operations as a profit maker, subsidizing other city departments' budgets.
 
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Old 11-18-09, 08:22 AM
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Interesting, to both of you.

I have never heard of municipal run utilities before. I'd imagine if they were, you would see trucks looking at the meters or shutting people off, that have the name of the town on the side of their truck then?, rather than say WE or Xcel?

You mean then that municipalities will fix pipe line leaks and stuff also?, or be the contractor that subs out the work?

To those of you not from the upper midwest - have you heard of the Xcel Energy Center in the Twin Cities?, when sporting events are on tv?, and the announcer announces that venue?
 
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Old 11-18-09, 05:11 PM
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Originally Posted by ecman51` View Post
What was it 24 years ago and what is it now?
Being someone who NEVER throws anything away, I dug out some of my old gas bills after I got home tonight. I can't go back 25 years, but I do have my gas bills back to 1985 when I moved into this house. In 1985, I was paying $2.85/MCF. Fast forward to this year, and my latest bill is $5.31/MCF. That is quite a bit cheaper than the high of $11.56/MCF in August of 2008.

Municipally owned utilities are very common around here. Every city has municipally owned water and wastewater, of course, and many also have their own electrical generation and distribution, natural gas distribution, and trash collection. I know of one town here in Kansas that has a municipally owned telephone system, and I think there are a few with municipally owned cable TV systems. In the midwest rural areas, the big publically owned utilities were slow to service the less-profitable smaller communities, so those communities took it upon themselves to establish their own city owned utility systems. And yes, city staff and city marked vehicles do the meter reading and servicing.
 
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Old 11-18-09, 07:20 PM
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I'll have to double check what my first bill was. It sounds like your last 2 figures are pretty much inline with charges we have had here. You may be a little lower. I thought my first bill was around 50/ccf. I'll have to double check though to see if I'm mistaken, now that I see yours was only 28 1/2.
 
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Old 11-19-09, 11:58 AM
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I did! Back in Jan. '86 it varied between 56 and 60, for the months near that date! So I was right. Even worse than right. So considering my last Oct. '09 bill was 66 - why on earth they actually charging less, considering 3% a year compounded inflation rate, minimum?????
 
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Old 11-20-09, 09:40 AM
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Originally Posted by ecman51` View Post
Right now, considering inflation, my gas is the cheapest I can remember in 24 years of being their customer. My last bil was only 66/therm.
I have been on my gas company's (NIPSCO) budget plan for years. Last year my budget plan bill was $200/mo from Oct to May. Imagine my surprise in July when NIPSCO offered me a 12-month fixed bill for $82/mo! I hadn't paid that little in a 12 month period since 2000.

I called as asked what that price was based on and was told $.60/therm. The flyer had all the appropriate disclaimers (we don't guarantee that you will save any money, etc.) but I decided to go ahead, knowing that I was probably overpaying. For me, knowing what I'm paying for 12 months was worth passing up a few bucks for.
 
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Old 11-20-09, 10:38 AM
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Just to throw in...we just got notified our gas bills will be about 16-18% less for the next 12 months. Something about a rate increase that was approved a while back, but then not needed since the price of NG has dropped, we get a credit for what was already paid as well as the lower cost of NG now.

I was reading a story about a small town up near the Grand Canyon that handles electricity for residents. They got a 20 yr contract with the supplier that expires in 2018. They haven't had an electricity rate increase since 1992!! Some of the taxes and delivery charge things have increased..but not for the actual 'tricity used. How bout them apples!
 
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Old 11-20-09, 11:41 AM
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Sounds like when you order tv infomercial stuff and they say they throw in the second set for free, but you have to pay the extra shipping and handling. What do they think? - we're all stupid? (I was tempted to save typing a letter by typing 'were'. LOL)

I suppose Grand Canyon electricity comes from dams? And maybe they are making turbine generators and replacement parts in China now, so they can pass on the savings?

I am happy for you that NG wil be so cheap. But do you know what I mean? Isn't it odd though that they would actually go down in price, rather than even keeping it the same price? Isn't it odd the gov't would regulate THEIR over-cost profit margin?, but not do the same to say other things that we need? Say health insurance? Er...wait a minute. Oops - they are trying to push that one through. I forgot.
 
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Old 11-21-09, 02:31 PM
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I live in NJ and get my gas form New Jersey Natural Gas. NJNG has a charge for delivery and a charge for the gas itself. The charge for the gas is exactly what they pay for it. They are making money on the delivery. I don't know if that's their policy or some kind of regulation.

I can go and get my gas from another company. I will still be billed by NJNG for the delivery. They may even do the billing for the company I buy my gas from. I'm not sure about that, but that's how it works for my electric.

The price for natural gas is all about futures contracts. It is traded as a commodity like oil. A large company like NJNG is buying contracts that are far into the future. So the price they pay for gas doesn't fluctuate as much because they are already locked in. So if they buy contracts for the next six months that say they pay $1.20 per therm, then they will have to pay that even if the market is trading gas at $.90 per therm.

That's what gives third party companies the opportunity to have lower prices. The few that I checked out allowed you to lock into the same rate for a year or go month to month. The month to month will follow that market trading price.

So why did gas get so cheap? About a year or so ago it was trading for over $1.00 per therm. At some point it was down to, I think, less than $.40 per therm. It closed on Friday for around $.44 per therm.

I am aware that it isn't traded in therms, but the conversion from MMBTU to therms is really close.
 
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Old 11-22-09, 09:55 AM
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Per your last sentence - it gives a therms per cf conversion of about 96% I think. Something like that.

In our capitalistic society, I guess every commodity is traded and speced upon. In the movie "Trading Places" with Eddie Murphy and Dan Akroyd, orange juice was the commodity that the movie used.

So what is NG going for in NJ right now?
 
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Old 11-22-09, 10:44 AM
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They are charging me $.80 per therm for gas and an additional $.49 per therm for delivery. It does seem a little high given the price it is currently trading for, but like I said, it's all about futures contracts and they also have to pay for the delivery of the gas to them. I could shop around, but I'd rather stick with the good ol gas company.

I also have gotten rebates from them for lower gas prices. So I could foreseeable see more of that if prices continue to stay low. I'm on the budget plan, so that may affect things.
 
 

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