Anyone for Rate-base Regulation?????

[Tax Counsel]

Of course, here in California, natural gas utility companies are rate regulated by the Public Utilities Commission ("PUC") and have their property assessed annually at fair market value (i.e., no Proposition 13 protections). The first few lines of text on the PUC’s website say it all: “The PUC regulates privately owned telecommunications, electric, natural gas, water, railroad, rail transit, and passenger transportation companies, in addition to authorizing video franchises.” (www.puc.ca.gov) As you may be aware, rate regulation is the reason that PG&E, SoCal Gas, and SDG&E CNG stations are forced to keep their gas prices low in contrast to CE. Anytime those utilities want to raise rates for non-commodity CNG services they must petition the PUC.

Normally, I'm anti-regulation and in favor of smaller government. But, for some reason, CE gets my goat. Yes, their stations are usually well-maintained. But is it worth an extra 50¢, or more per GGE? Not in my opinion.

[CraziFuzzy]

Re: Anyone for Rate-base Regulation?????

The solution to the CE problem lies in competition, not regulating them out of profitability. Any reguations you encourage to be placed on CE would be placed on any competitors, thus stiffling the market, and making it HARDER to get into the market. This is definately NOT what we want.

[freedml]

Re: Anyone for Rate-base Regulation?????

Ok, so here's the complaint I just filed with the PUC:

This company has a monopoly in many areas in providing Compressed Natural Gas for Natural Gas Vehicles. They have taken over numerous dispensers in Los Angeles County (most notably from Southern California Gas Co. and Long Beach Gas Dept.) over the past few years.
Their stated policy is to raise their prices 'so they are below gasoline' rather than raising their prices based on their cost for Natural Gas. Their prices have gone up $1 or more per GGE in the last year when the price of the gas has gone up only about $.25 for residential retail customers (presumably their cost for gas has risen much less).
Since public CNG stations are located so far apart, each one is a monopoly. But Clean Energy, operating some 90% of the public dispensers in Los Angeles County (they also operate in other counties, but I am most familiar with LA), has monopoly power to set prices for 95% of consumers who use CNG in the areas where they own stations.

You can file one at http://docs.cpuc.ca.gov/complaints/

[Adrian]

Re: Anyone for Rate-base Regulation?????

I agree. I filed a complaint as well. I find this to be ironic because I support the idea of CNG as a transportation fuel and as such the idea of Pickens plan, but I don't think there is any justification for CE making out like bandits in overcharging for fuel simply because they can due to their monopoly.

[freedml]

Re: Anyone for Rate-base Regulation?????

Not really ironic. Regulation doesn't mean they won't make money -- in fact, it guarantees them a price that should give them a reasonable profit. But perhaps not as much of a profit as they would make with monopoly pricing power. The PUC could find that their pricing is justified given relatively low volume and high maintenance costs of CNG stations.

[CraziFuzzy]

Re: Anyone for Rate-base Regulation?????

You realize that with the regulation in place, when more non-CE stations are opened, they will not be in a price war anymore? as they can just freely charge what the going PUC rate is, and not have to worry about competition? How does this help any of us?

Some times you guys really do scare me. Bitch and complain about the government's actions in one breathe, and go whining to them to interfere elsewhere.

[Adrian]

Re: Anyone for Rate-base Regulation?????

You realize that with the regulation in place, when more non-CE stations are opened, they will not be in a price war anymore? as they can just freely charge what the going PUC rate is, and not have to worry about competition? How does this help any of us?

Some times you guys really do scare me. Bitch and complain about the government's actions in one breathe, and go whining to them to interfere elsewhere.

It would help us fuel at a lower rate. Unfortunately when it comes to big money investments, the free market isn't all that free.....and it takes forever to actually do something. Yes, I'm aware of the CE and Trillium example in GG and State college. Too little and too late in my opinion. As far as governmental actions....I know the track record for positive governmental action isn't all that great...but I doubt it would result in higher CNG prices at the pump. Who knows? They might be smart enough to look at Utah and learn something.

[CraziFuzzy]

Re: Anyone for Rate-base Regulation?????

I'm all for slow change... Utah's rapid change to the market has NOT helped CNG in the long run. The demand has been boosted way too fast for supply t ever catch up, leading to the insane profits, which have in turn led to the rapid increase in illegal conversions, and other unscrupulous activities.

[freedml]

Re: Anyone for Rate-base Regulation?????

When other stations open up and there is competition (read: 20 years from now), then they can petition not to be regulated any more.

[CraziFuzzy]

Re: Anyone for Rate-base Regulation?????

When other stations open up and there is competition (read: 20 years from now), then they can petition not to be regulated any more.

Do you SERIOUSLY think:

1.) there won't be new stations for 20 years?

2.) the PUC would remove any industry from their control once they've got it?

If you think the future is so bleak, why 'campaign' for any of this anyways?

[freedml]

Re: Anyone for Rate-base Regulation?????

Wow, you think I think there won't be ANY new stations for 20 years and then they will spring up like mushrooms on 7/13/2028? No, I said that I think it may take 20 years to have COMPETITION in CNG stations at the rate they're going. How many stations have opened up in the past 4 years. I can think of 2 in LA County -- Santa Clarita and San Fernando. Meanwhile Glendale, UCLA and the Agoura Hills dispenser closed. Maybe I'm missing one or two but that isn't explosive growth. Santa Clarita is run by CE adding to their 'monopoly' position and San Fernando is independent. But I don't know of any two stations in LA County that are close enough to give each other price competition. Unless you're driving a long distance you really only have one or two stations to choose from.

According to the Wikipedia article "the California PUC has reduced rate regulation of most telecommunications providers where there is vigorous competition". So, yes, I think they can recognize where competition develops and abandon their regulation when it is in the public's interest. If it's an infrastructure-dependent service, like residential electric, water, gas, or CNG stations, it's a lot harder than telecommunications where technology allows competition without massive capital investment.

[CNG-UNIT]

Re: Anyone for Rate-base Regulation?????

I think your going to have a tough sell on something like this. CE is not a major retail chain, its primarily a fleet based fuel provider, and it is still a small company in comparison to many utiitlies and especially the big oil companies you often compare it to.

They dont even have a profit on the books, so I feel like you are going to have a tough time convincing a regulatory agency that they need to be regulated. Maybe years from now there might be a case for this, but right now I am 100% in the "more competition" school. And I think that will certainly happen in the future. If pickens plan does get some traction and especially if the OEM's ever choose to re-enter the domestic NGV production market, CE will not be the only game in town anymore and they will need to shift their business models a bit.

[freedml]

Re: Anyone for Rate-base Regulation?????

They wouldn't regulate the whole company, just the CNG-selling-to-the-public part. If CE is using gov. grants to build these dispenser stations and then making a big percentage on the CNG sold to the public they will be ordered to lower their prices.

I have never compared them to a big oil company. I'm all for competition, but there is no competition in CNG. There wasn't much competition in CNG before CE took over the SCG and LBG stations. About the only exception was Glendale/Burbank where two stations were only a couple of miles apart. Once Glendale was gone the price at Burbank rose to the level of the other CE stations.

No matter how big or small they are, they have a monopoly in selling CNG to the public in many areas, and that's what the PUC does, regulate monopolies.

[p71]

Re: Anyone for Rate-base Regulation?????

Thanks for the link.

I'm going to exercise my freedom of speech right to let them know what I think about Clean Energy's outrageous price hikes in Los Angeles.

[CraziFuzzy]

Re: Anyone for Rate-base Regulation?????

It is not an enforcable monopoly if noone has even TRIED to compete. Anti-trust laws and regulations come into play if the market holder uses unfair business practices to squeeze out competition. CE has noone even trying to fight against them, so you can't say they are being unfair to anyone. The few areas that they DO have competition, they, instead of trying to force them out of business, simply got in a small price war, and both enteties have stabalized at a somewhat reasonable market price. This would happen elsewhere, if there were enough cars on the road to warrant someone throwing their hat in the ring.