Replies to This Discussion

Permalink Reply by Robert Duke on November 11, 2010 at 19:18

Okay, Les. Thanks for further clarification. The $10 distributed cost, I have to admit, is pretty consistent with what I was paying in North Carolina last winter, and I think with what I am paying in Washington State right now, so it is not a Louisiana anomaly by any means; just a bit of a shock that this stuff can triple the price. I suppose all of us with royalties are to some extent sucking eggs over how low the wellhead price currently is; hope the producers can just choke things back for a while so that supply and demand gets a bit more favorable!

Permalink Reply by P.G. on November 12, 2010 at 2:42

I don't have my bill handy but I thought there was a separate distribution charge on it besides or in addition to the actual cost of the gas..
From what I got from scanning over that PSC thing, the cost of gas is what they paid for it the prior month or maybe some kind of estimate.
I would think that would lead to the impression that someone else had marked it up before the gas company bought it..

Permalink Reply by Robert Duke on November 12, 2010 at 7:29

Okay, I could not quite let this go yet; the next thing I came across, though, sort of supports Les' assertion that distribution is expensive (or maybe sanctioned to be highly profitable - I am not sure which yet). I found a doc from around 2000 discussing natural gas pricing breakdown, the doc is from the UN but is discussing the US natural gas market. To quote:

"In general, the main components of natural gas price are:
- wellhead price (the cost of natural gas itself or commodity cost)
- long-distance transportation cost
- local distribution cost

In North America, wellhead prices were the first to be deregulated. Transportation costs are still regulated by National Energy Boards, while local regulatory boards regulate local distribution costs.

According to EIA, in 2000 wellhead price represented 34% of residential natural gas price, while transport accounted for 19% and distribution to customers 47%. The largest share of the final price is made up by distribution costs. As most large industrial and commercial gas users tend to buy gas from producers or market makers, they reduce their price considerably."

For those interested, the link is:
http://unctad.org/infocomm/anglais/gas/prices.htm

Probably some plowing around on the US natural gas-related govt and industry web sites would be even more informative. I seem to remember investing in utilities stocks in the past due to the good dividend returns, but I spend a lot more time thinking about tech than money...

Permalink Reply by P.G. on November 12, 2010 at 8:05

So for a question, what was the well head price in 2000? I don't see how a set percentage would be accurate as well head prices rose. I mean I don't see it would be any more expensive to distribute $2 well head gas than say $6 or $10 well head price gas.. It would seem that as prices at the well head increased, the cost percentages of the total price would fall.
The pipes don't know how much the gas it's transporting costs.. Considering they are marking up $3.50 well head price gas $300% or so, I'd hate to think they could mark up $6 gas to $18, or $10 gas to $30! Someone would be making out like bandits! Costs to distribute should be fixed costs even if expensive.

Permalink Reply by Robert Duke on November 12, 2010 at 8:23

Hi P.G.,
Yes you are absolutely right, and the numbers on distribution cost have to be compared to 2000 wellhead prices. I actually took a quick peek at those - looked to be in the around $3-$4 range, Henry Hub, roughly (very quick look, don't hold me to extreme accuracy). I don't know what inflation since 2000 is, but since the early 90's, I think it is appreciable, so that muddies the water a bit. But if you take the fact that the gas prices are about the same as now, allowing for a little inflation and assuming we should be getting $4-$5 pretty soon, not $3-$4, it all seems sort of consistent; the article is not saying that the distributors are guaranteed those percentages, that is just what they got against 2000 gas prices. My final comments were meant to allude to the fact that I think public utilities are a bit of a racket, and not all that competitive, though to be fair I have not researched this point to any great extent; I just know in the past that utilities dividends were likely to be good. My personal experience is in the computer business as well as biosciences; in working for various major computer companies in the past, I was always amazed at how poorly AT&T could compete when they had to; to me it seemed they were used to being a protected utility, essentially. Just my impression.

Permalink Reply by P.G. on November 10, 2010 at 6:44

No, they have other charges on there for that. That $10+ is just for the gas which they claim they are just passing along. Must be someone upstream from them marking it up 2 or 3 hundred percent. Must be using gold plumbing to process it before sending it to Centerpoint, huh?

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Permalink Reply by Les Bamburg on November 10, 2010 at 16:40

PG, the mark-up is for the cost of providing gas service to your home. If you want more information just get all the documentation realted to Centerpoint's most recent rate case from the Louisiana Public Service Commission.

Permalink Reply by benny688 on November 24, 2010 at 15:22

I really can't remember what the years were, but when my ETXIndGas service switched to Reliant I started getting huge bills. I just paid them without protest since ng was rising at the time.

Two years later I received a check from Reliant for about $4K to reimburse the illegal overcharges.

GLTA

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Permalink Reply by Skip Peel - Mineral Consultant on November 9, 2010 at 17:27

Gas gluts tend to minimize seasonal price spikes. In past years we didn't have this much production nor this much in storage.

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Permalink Reply by Linda Whatley on November 9, 2010 at 17:46

I heard we were in for a much milder winter than last year.

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Permalink Reply by ken hatcher on November 10, 2010 at 5:24

Exactly... and the addition of the Fayettville Express and Tiger pipelines will simply compound the problem.

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Permalink Reply by Bill R on November 9, 2010 at 17:40

NW Oregon is nice and wet... just the way I like it!!! Now we need some cold to go with it!!!!
And this should get the fish running, people staying home and get them all to start turning up the thermostats!!!!
That will leave all of the fish for me....
mine!
mine!!
all mine!!!
Sorry the thoughts of money and fishing brings out the Daffy Duck in me!!!! ><(((( { *,>l

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