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mickey's counterarguments on Utah PSC / Questar ruling

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  • mickey's counterarguments on Utah PSC / Questar ruling

    Forum staff note:
    In the interest of keeping a topic from being monopolized by one poster, the following three rapid-fire posts were exacted and consolidated from a thread in the Utah Forum.


    Originally posted by John Mitton
    We are paying for road maintenance via the $82 surcharge for the C plate -- which will go to zero in January in exchange for a 8.5 cent per gge tax at the pump. Again, this is mostly about being forced to trade stable local-source fuel pricing for volatile national market pricing.
    If you choose to get the C-plate, which I did not. Gasoline customers to go jail if they burn non-taxed fuel on the highway. Why should MY tax be optional?

    They're adding 8.5 cents to the fuel? Fine. That's fair.

    As for "local-source": Utah is not an independent country. And most of it comes from Wyoming anyway. What if Wyoming decides to charge Utah a bazillion dollars for it? Is that fair?

    The national market is more volatile, but in the long run the stuff sells for what it's worth. It all averages out.

    Originally posted by John Mitton
    mickey makes some valid points. I agree that subsidies should end, but forcing us to pay national market rates vs. the 50/50 blend of national/local fuel pricing enjoyed by other rate payers makes no sense at all to me.

    If the PSC were not so adversarial with Questar we might even see a welcome modest per-gge surcharge to fund additional refueling infrastructure.
    Questar would happily improve the infrastructure, PSC be damned, if there were PROFIT in it. There is not. CNG for vehicles is a political football that they'd really prefer not to play with at all.

    The REAL price for CNG, including road taxes and a new, up-to-date fueling network would be a whole lot more than $1.40 per gge. It's just never going to happen until we're willing to pay for it.

    CNG is also subsidized in California and the stuff is $2.50 a gallon or so. (Or was back in May, anyway.) They're not ripping anybody off. That's just what it costs. Most of the pumps are fancy and new, and take credit cards. Granted, the raw material is a bit cheaper here because it doesn't have to be shipped 800 miles by pipeline, but the "real" cost in Utah is probably still upward of $2 per gge with all the bells and whistles.

    Realistically, comparing apples to apples, CNG is more expensive than the current price for gasoline. We're getting a sweetheart deal. I wouldn't rock the boat. Mess with Questar on this and they might just shut off the pumps.

    Incidentally, complaining to the PSC is a waste of time. Federal law requires Questar to adopt the new pricing structure. You're talking about forcing Questar to subsidize CNG even more heavily than they're already doing, and that would inevitably result in higher prices for home heating fuel since they ARE a regulated monopoly in that market and they are guaranteed a certain profit margin. There is no free lunch.

    Originally posted by chad.nuesmeyer
    My knee-jerk reaction is to support the subsidy. However, I would like to know more about Wexpro (let me know where I can learn).

    If UT is producing CNG at a significantly lower cost then I think it would make sense that stations within a relevant distance are allowed to continue to pay and charge a lower price. I just don't know enough about the inner workings of the system.

    - Are we certain Wexpro pricing is universal in all pricing throughout the region?
    - - If the main concern about including Wexpro in the price is getting fuel to Questar customers then a loyalty program could be implimented (resulting in an incremental increase in cost [to support the program] rather than a 75% increase in the total fuel price.
    - Who is the "company" that is detailed in the letter? Questar?
    - Who or what will step in to fill the vacuum left when the "company" steps out? T. Boone? Chevron?
    - What other user's of NG are not paying the full rate? Why?
    Everybody is paying their own "full rate" based on the cost of delivery and the volume they buy. Big users who are relatively close to the production points get a cheaper rate, obviously. Rates vary for good reasons.

    Think about it: I can build a new home and Questar is REQUIRED to come out with a crew and install a service line to my home, along with a meter. But I am under no obligation to actually use any of the stuff. I could heat my home with firewood if I choose. They might NEVER recoup their costs in my lifetime. That's a pretty good deal. But it also makes sense that my residential rate per therm is going to be higher than, say, Utah Power's Gadsby plant on North Temple. They buy vast amounts of gas, and they paid through the nose to help install the delivery infrastructure. Of COURSE they'll get a cheaper rate.

    One think to consider, though it's too late for me to think it through (too tired): Questar the "gas company" and Questar the "gas exploration and drilling company" are two different animals. I'm sure that factors into the equation in a number of ways. The "gas company" is a regulated monopoly. The guys sucking the gas out of the ground are NOT.
    Last edited by John Mitton; 12-24-2008, 12:49 AM. Reason: Multiple posts in sequence

  • #2
    Re: mickey's counterarguments on Utah PSC / Questar ruling

    Incidentally, my "multiple posts" were replies to multiple counter-arguments. I think that's reasonable. But apparently any points of view that don't agree with the mainstream here are considered "Rants."

    Fair enough. It's not my forum. I'll exercise my marketplace options.


    • #3
      Re: mickey's counterarguments on Utah PSC / Questar ruling

      So who is making a profit off of natural gas? And, Questar has had its CNG stations to the public for years, why not change the price before the Dec 22 ruling? (I know, because more volume of users.)

      So in the end, there is really no advantage, and actually more of a disadvantage to drive CNG (assuming we do not reverse the dec 22 ruling).


      • #4
        Re: mickey's counterarguments on Utah PSC / Questar ruling

        That assumption only holds water if oil stays at $50 a bbl... and we know that isn't going to happen. When gas is back to $3 a gallon+, and cng is $1.88 (assuming the worst case) I think you'll be quite pleased to be behind the wheel of your cng powered Pickensmobile.


        • #5
          Re: mickey's counterarguments on Utah PSC / Questar ruling

          From Mickey's previous argument, quote: "That IS a valid reason in a capitalist system. They own it. We want it. We either pay their price or find an alternative.

          The system doesn't work when there IS no reasonable alternative to a necessary commodity. But that doesn't apply here. We can drive gasoline powered cars. The marketplace works THERE just fine, as Flying J just discovered to its sorrow.

          CNG for vehicles is simply a different animal than the heating stuff. Competition is alive and well. What do you think the current gasoline prices are doing to the demand for CNG cars? Add in a rate hike that makes CNG the same price as gasoline and do you think anybody will buy CNG cars? Nope. They'll buy the alternative that is available on every street corner. Thus, the system works as it's supposed to."

          First of all, there is not a reasonable alternative for those NGV owners who have a Civic GX that only runs on CNG. They cannot put gasoline in their cars. If natural gas rates go up as planned there will be an immediate depreciation of NGV's and it will be hard to get rid of them to chose some other alternative.

          Secondly, competition is not alive and well. Questar has a monopoly on natural gas for vehicles. Would you be in favor of Exxon-Mobil having a monopoly on all the gasoline in the State? After all, we have the alternatives of propane and natural gas? Would you call that truly competitive because alternatives exist? That is not the true capitalist system. Monopolies should be regulated in a capitalist system until there is true competition in that market segment. Until there is competition in the natural gas for vehicle market it should be regulated by the PSC.

          Furthermore, the national market for natural gas for vehicles is not a competitive market. For example, the largest marketer of natural gas for vehicles in the U.S. is CleanFuels, a T. Boone Pickens company. They have stated publicly that they set their CNG prices to be slightly below gasoline prices in each area they serve. Their prices are not driven by competition from other CNG sellers as it is in the gasoline market. They are artificially setting the price because they have a near monopoly and are getting away with that monopoly because they have no other competition other than gasoline.

          Questar will now become the CleanFuels monopoly for NGV's for Utah. They will now make money hand over fist on the NGV owners of the state. Then the NGV owners will be subsidizing other Questar traditional customers with unreasonable profits to Questar - the very argument Questar used to secure the PSC ruling. How is that fair?


          • #6
            Re: mickey's counterarguments on Utah PSC / Questar ruling

            Originally posted by Curtis View Post
            When gas is back to $3 a gallon+, and cng is $1.88 (assuming the worst case) I think you'll be quite pleased to be behind the wheel of your cng powered Pickensmobile.
            Curtis ~ I must respectfully disagree. If history holds true, CE will also increase their CNG prices, pacing any increases in gasoline prices. Other members became downright giddy when CE reduced their price to $1.299 per GGE. As I noted in other posts, however, that price was merely 50ยข less than the gasoline price around Dec. 30, 2008, which fits squarely within CE's apparent pricing formula.

            When gasoline returns to $3/gallon, I fully expect that CE's CNG price will be at set at $2.50 per GGE, not $1.88, as you predict. Nevertheless, next month (Feb. '09) may provide a hint of what's to come. We'll see how CE responds as the regular unleaded price in So.Cal. breaks $2/gallon.



            • #7
              Re: mickey's counterarguments on Utah PSC / Questar ruling

              Capitalism in America often takes on the inverse of Reductio ad Hitlerum. If it is capitalism it must be good.

              I do not consider myself a socialist by any means, I am an entrepreneur myself and love capitalism. However, capitalism is not the be-all end-all of economic and social solutions. Capitalism alone does not prevent corruption or manipulation. Why else do we have laws against monopolistic practices, price manipulation, et cetera. What do capitalists actually go to prison for? Who decides when they have crossed the line ethically?

              Another thing that capitalism does not do well is plan for the future. Capitalism is about here and now, and what is popular and what is selling. Capitalism is one of the reasons our air is so gunked up with crap. Capitalism is not self monitoring and it is not responsible for the next generation.

              Capitalism should be allowed to flourish but under the reasonably watchful eye of the government. When capitalism does not stear us towards smarter more ecologically sensible fuel choices, then the government can and should show its purpose.

              Another thing that capitalism does not do well is respond to panic. Tulips, and oil have felt capitalistic pressures that have horrible consequences for an economy. What is bad is that oil is the lifeblood of our economy.

              I do not view capitalism as some pure religion. I treat it as a vehicle, one that requires care and maintenance, and some oversight. I look at the government as a restricted engine that paces our economy and directs our future. Together, when both are running in sync we have prosperity, when either gets out of control we have chaos.


              • #8
                Re: mickey's counterarguments on Utah PSC / Questar ruling

                I agree with all you've said, however I was referring to Utah prices, which are (for the time being) independent of CE pricing influence. If the choice were between $1.88 pump prices in Utah, and selling the infrastructure to CE... is there any doubt that everyone would be onboard for the former, rather than the latter?


                • #9
                  Re: mickey's counterarguments on Utah PSC / Questar ruling

                  Originally posted by Curtis View Post
                  That assumption only holds water if oil stays at $50 a bbl... and we know that isn't going to happen. When gas is back to $3 a gallon+, and cng is $1.88 (assuming the worst case) I think you'll be quite pleased to be behind the wheel of your cng powered Pickensmobile.
                  Here in AZ, CNG was close to $3.00/GGE last summer. CNG cars still sold well, because gasoline was $4.00/gallon, sometimes more.

                  No system or infrastructure will survive under government regulation or tax breaks. Things have to make it on their own. We all know government is inefficient and will ruin anything if given chance. CNG can stand on it's own without any problems. Free market can fix just about anything, it always has.

                  We know that crude oil will get more expensive once again. CNG will make it's way on it's own without tax breaks.