NationStates Jolt Archive

http://www.connpost.com/news/ci_3297184

Yankee Gas customers have apparently done too good a job with conservation, because the company is now asking for a rate hike based, in part, on a drop in use.

http://www.connpost.com/news/ci_3297184
Operant word: "asking"

Energy companies are, almost without exception, highly regulated. Any rate increases must be approved by a local or State board and are subject to political oversight. Not happy with your energy company? Call your State Representative. :)

This might be of some interest. My dad's girlfriend works for the Energy company in Tijuana and she said that the company looses a lot of money on hot days. You would say, 'yea that's pretty damn obvious.' Why? Because no necessity to heat. Well, apparently not. She says that the number one source of loosing income on hot days is the fact that people don't heat water as much [tea, coffee, hot cocoa, et cetera]. A bit on a tangent; but interesting nonetheless.

Operant word: "asking"

Energy companies are, almost without exception, highly regulated. Any rate increases must be approved by a local or State board and are subject to political oversight. Not happy with your energy company? Call your State Representative. :)

I realize that, but you have to appreciate the irony. Can we ask the big oil companies for a rate decrease now due to increased demand? Can we?

I realize that, but you have to appreciate the irony. Can we ask the big oil companies for a rate decrease now due to increased demand? Can we?

Slightly different analogy. Our electricity isn't imported from potentially hostile governments.

I think it's probably because the utilities company isn't a producer, but rather a distributor of natural gas; when demand drops, they make less money, but the price they pay to producers doesn't drop because supply is tight and demand is high in other places, driving up the cost for all purchasers of natural gas.

As a result, power/utility companies have to raise prices to cover the wholesale cost even though they are consuming less. The problem lies at the wholesale and production levels, not the distribution level.

I realize that, but you have to appreciate the irony. Can we ask the big oil companies for a rate decrease now due to increased demand? Can we?

It's the oil companies fault that this happens, because they are the producers who sell the gas to the distributors, but the price they charge distributors doesn't fall because natural gas is traded on a national level and supplies are tight enough everywhere else to drive up wholesale prices.

This means that even though demand has fallen in Yankee Gas Co's region, they are paying for rising demand in the Midwest or South, for example.

This is what is happening:

Natural gas trades at around $13 per 1,000 cubic feet. Utilities buy it at that price and then charge a small amount (in NE Ohio it's $1.76 additional or about 13%) additional to make a profit and cover costs and then sell it to consumers.

Now, lets say demand is 1.3 billion cubic feet in a region. At $14.76 per 1000cubic feet, the utility makes $19,188,000,000 and pays 16.9 billion for a profit of $2.288 billion...normally.

However, what is happening is that demand has fallen, to say 1 billion cubic feet. The wholesale price rises, however, to $15 per Mcf. So, cost has risen to 15 billion while sales have fallen to 14.76 billion; as a result, they must rais prices to cover the shortfall even though the demand has fallen.

It's the oil companies fault that this happens, because they are the producers who sell the gas to the distributors, but the price they charge distributors doesn't fall because natural gas is traded on a national level and supplies are tight enough everywhere else to drive up wholesale prices.

This means that even though demand has fallen in Yankee Gas Co's region, they are paying for rising demand in the Midwest or South, for example.

Fair enough, but that doesn't excuse the company itself from suggesting that conservation is part of the reason for the rate hike.

The garbage pickup system is doing that here. They are cutting pickups to once a week while jacking the price.

The garbage pickup system is doing that here. They are cutting pickups to once a week while jacking the price.

Isn't garbage collecting a localized monopoly?

Isn't garbage collecting a localized monopoly?
I think the asshats in our local beucracy council are running it here.

Fair enough, but that doesn't excuse the company itself from suggesting that conservation is part of the reason for the rate hike.

For the utility, it does. They have little control over natural gas prices at the wholesale level, so even if demand falls in their region they still have to pay the same price to the wholesale producers, with the result being rate hikes in order to cover the cost.

The only thing utilities can hope for is for wholesale prices to fall, otherwise there is nothing they can do but raise prices.