Cost increase for CNG in Utah

[gnolaum]

Recently Questar requested and was granted an increase in the price for natural gas in Utah. One of the reasons sited is the increase demand due to the big jump in CNG vehicles in Utah. The problem with it is that it effects all natural gas usage, whether it is used in a car or to heat a home with a furnace or using a dryer, etc... So a 20% increase for CNG in a car may still feel like a great deal, but a 20% increase in home energy bills which effects almost everybody has some people getting uneasy about the big move to CNG in Utah... maybe the price for fuel in cars should no longer be subsidized by the state so home energy costs will not be as tied to car gas prices and CNG usage in cars... As it is now, only a relative few benefit from the low price to fill up their car, but everybody has to pay more for natural gas. If the trend continues and CNG cars continue their popular trend, it could really have a negative impact on home energy prices.

How do you respond to that kind of critique?

[freedml]

Re: Cost increase for CNG in Utah

The price of CNG isn't 'subsidized', it's 'regulated'. Questar is allowed to charge what it needs to charge to make XX% (often 10-15%) profit on its investment in return for having a monopoly. The alternative is for them to do what SoCalGas and Long Beach did and that is spin off the CNG stations, sell gas wholesale to the CNG company, and let them raise the price of CNG and make a big profit per GGE (which is what CE has done in So. Cal.). Sure, you'll use a little less NG for cars but it won't affect the price of home NG much either way.

[CNGLO]

Re: Cost increase for CNG in Utah

If you drive a GX 15,000 miles in a year, you will be using less natural gas than you will burn in your furnace (Utah winter) and water heater during that same year. Let's take a very conservative estimate of 30 miles per gge in the GX. And peg the average price per gge from Questar at $1.00. That 15000 miles in your GX will cost you $500 in fuel costs. Now, ask yourself if you pay more than $500 to heat your home and your hot water in a year. Even with the housing slowdown, we are adding more houses in Utah every year than we are adding natural gas vehicles. A house uses more natural gas than most of us use in our vehicles. My point is that the influx of natural gas vehicles is not the reason for the increase in the costs of fuel delivered to homes. The rate increase is due to Questar's increased costs for natural gas it has to buy on the market to supplement what it produces. If there is an increase in cost to Questar because of the added natural gas vehicles, it is only a minor part of their overall costs.

[freedml]

Re: Cost increase for CNG in Utah

I think maybe you are confusing the cost of gas with the cost of maintaining CNG stations. They are losing money on CNG because compressors and other station equipment are expensive to maintain per therm handled compared to pipelines and meters. Their cost for taking CNG out of the ground is almost zero. Their costs are almost all in distribution and administration.

[Beej]

Re: Cost increase for CNG in Utah

I've heard this argument many times in the 2 short months I've had my car. What I think is interesting is how no one is talking about the fact that everyone driving a NGV has removed themselves from the demand on gasoline. Wouldn't that be viewed as a good thing?

The answer I get back from that is that a few hundred drivers isn't going impact the price of gasoline, it's not a big enough dent. So then why is there a worry that it will be enough of an impact in natural gas demand to affect the prices?

The simple answer is, it's not. It just happened to be bad luck that the surging interest in NGV happened at the same time that Questar asked for an increase. I'm pretty sure they would have asked for the increase regardless of how many GX drivers were on the road.

[lshuster]

Re: Cost increase for CNG in Utah

CNG use as a transporation fuel is a drop in the bucket, in Utah or nationally. It's increased popularity is not primary cost driver. If you look at the historic trend of natural gas prices, it is the least volatile transportation fuel we have and it just happens to for the most part wholly domestic.


Don't forget that a portion of the recent CNG pump price increase is to earmark a percentage for Utah State fuel Taxes which go to UDOT highway funds. That was part of HB 106 in this year's legislature, in lieu of collecting the Clean Fuel - Clean Air ($82) plate fee. Personally, I'm glad for the rate increase, I'd rather pay for the road miles I actually drive. And collect it from those CNG vehicles passing thru our "Pretty" Great State.

BTW, Anyone see what T. Boone has been saying in USA Today and the NY Times? See: http://www.usatoday.com/money/industries/energy/2008-07-08-t-boone-pickens-plan-wind-energy_N.htm

Whatever you think of his company -- he's the one guy that has that has a viable energy plan, imho. Maybe he'll actually reach "Peak Money" with his PR campaign?

lshuster

[Highmarker]

Re: Cost increase for CNG in Utah

Don't forget that a portion of the recent CNG pump price increase is to earmark a percentage for Utah State fuel Taxes which go to UDOT highway funds. That was part of HB 106 in this year's legislature, in lieu of collecting the Clean Fuel - Clean Air ($82) plate fee. Personally, I'm glad for the rate increase, I'd rather pay for the road miles I actually drive. And collect it from those CNG vehicles passing thru our "Pretty" Great State.

lshuster

Lee,

I believe that HB 106 will not take effect until January 2009. There will be 8.5 cent/gal increase at that time to pay for the Utah State Road Tax which will "do away" with the $82 plate fee.

Some good points are made. If NGVs in Utah are not making a dent in the state's gasoline use, then why would they make a dent in the state's natural gas use? The rate increase is not directly related to the boost of NGVs in Utah. By the way there is another 20% rate increase coming in October. I don't think that this one is related to NGVs either.

[RaulLasVegas]

Re: Cost increase for CNG in Utah

My gas cost here in Michigan has also gone up. What do you pay for natural gas at home? Here its $1.1262 per CCF.

[maxman]

Re: Cost increase for CNG in Utah

My limited understanding was the rate increase was across the board, meaning an overall increase for all Natural gas in Questar. I imagine if they wanted an increase because of cng vehicle usage, it wouldn't be too hard to just raise those prices specifically.
Max
Kaysville, Ut

[fquinonez]

Re: Cost increase for CNG in Utah

I not only am a driver of a CNG vehicle, but I am also an investor in a partnership that is drilling and pumping natural gas in North texas. I can tell you that in the last year, we have increased our price received for 1 MCF from about $5 to almost $9 on the wholesale market. There is a large demand for natural gas not only for vehicle use (which is pretty small) but for electric generation as well.

[hansonc]

Re: Cost increase for CNG in Utah

Some good points are made. If NGVs in Utah are not making a dent in the state's gasoline use, then why would they make a dent in the state's natural gas use? The rate increase is not directly related to the boost of NGVs in Utah. By the way there is another 20% rate increase coming in October. I don't think that this one is related to NGVs either.

My guess is the population growth in Utah is significantly higher than the NGV growth in Utah. More people = more cars, more cars = more gasoline used.

The growth in the usage of NGVs isn't likely to outpace the population growth anytime soon so it won't cause a lowering of gasoline usage while it does still increase NG usage throughout the state.