CE Gouging has begun again

[Thousand Oaks CNGer]

I am a little late, meant to post this several weeks ago....
but I love the CE pumps on the westside going up .30 in one week. One day up .15, a few days later another .15. OUCH!!!

A little uptick in gasoline, and CE is ready to open the price floodgates. I guess it is back to the Pinnacle pump in Thousand Oaks.

Of course being the monopoly in NG, can let you price it at whatever rate you want.

[Tax Counsel]

Re: CE Gouging has begun again

Gouging? Not really. Think of it as more along the lines of sticking to their pricing formula.

It appears to me that, more often than not, CE will price their fuel at gasoline cost less 50¢ per gge.

Watch them. As gasoline goes up and down they will usually quickly match the fluctuations.

[Curtis]

Re: CE Gouging has begun again

In general, I would have expected cng prices to be lower than they currently are based on the fact that commodity prices are at the lowest point I've seen them in years. Home refueling in So Cal is around $.70 a gge right now.

And Tax Council is absolutely right, CE pump prices are based on their own pricing formula, irregardless of commodity prices.

[tomdotstar]

Re: CE Gouging has begun again

Does anybody know what the CE pricing formula is? It sort of looks like 50 cents below average gas prices. Since most of CE's volume is probably diesel replacement, rather than gasoline, it may be related to diesel.

Also, the CE rate may be part of a contract with cities, counties, etc. Or they may have special rebates or deals with their bulk customers.

In any event, it would be good to know what their pricing formula is. If everyone knows what the rules are, everyone will make better decisions. And, I wonder whether the formula would hold if the cost of natural gas goes up relative to oil.

[Tom Stoflet]

Re: CE Gouging has begun again

Hi:

I have not reviewed the prices since February, 2009, in California where I live.

But as someone who has designed, built and managed the operation a CNG station in Northern CA, I can tell the cost should be much lower, and yet a station owner could still make a decent profit for each gallon (GGE) sold, and that does not even include accounting or receiving for the excise tax credit of $0.50/GGE that the station owner receives through EPACT (actually IRS).

So the concept of sticking to any "pricing formula" that was mentioned by "TAX Counsel" does not make sense (No disrespect to him), and has no bearing on how to assign or establish the price.

How I determined price was through a formula by amortizing the capital cost of the station plus the estimated operating & maintenance (O&M) cost divided by the estimated amount of fuel to be sold. Then track each month to see how the station is performing and make appropriate adjustments the next month.

I did this for 5 years on the station that I managed and we always made 20% to 40% profit on each GGE sold, and we were still the lowest priced CNG in California. How much profit does a company need?

Professionally, in the absence of understanding the major CNG station owner’s methodologies and I have asked several times, it is this type of greed that has gotten America in this economic crisis we are in. Still CNG is the lowest alternative fuel option.

We now just need a lot of courage from the legislators to mandate more CNG vehicles and provide for more incentives to the OEMs.

Tom

[cngacrossusa]

Re: CE Gouging has begun again

Thanks Tom Stoflet for setting record straight on ACTUAL reality of CE prices!!

I have to re-iterate my mantra of referring to Clean Energy as GREED ENERGY for all the practices and whining they do for more government handouts of subsidies and grants . . . . all the while they are GOUGING insane profits out of the general public for cng.

CE = GREED ENERGY . . . . that's the new Einstein equation.

Nothing worse than a monopoly that is allowed to screw the customer. Hey Tax Counsel, have you ever heard of the FTC (Federal Trade Commission) for prevention of excess market share (ie monopoly) power?? CE (ie GE's) actions in past year only support their plan to eliminate competitors in monopoly areas (ie Albuquerque, Las Vegas) and overcharge in other markets (ie Oklahoma City). Maybe T Boone has an old Pres Bush W cronie inside FTC as well that blindly lets all this monopolizing to happen!!

I'm sick of it . . . PLEASE Obama get us back to Reality!! NO MORE free money to CE/GE until they build a public cng facility in a new location where CE/GE doesn't have monopoly position!! I'm afraid there will be a giant sucking sound of CE/GE at the stimulus trough wasting all the taxpayer's money only to benefit T Boone. Now that's PORK for sure!!

[Tax Counsel]

Re: CE Gouging has begun again

Tom ~

My observations regarding CE's CNG price setting--and what I perceive to be their pricing formula--are just that, observations. Is my approach overly simplistic? Perhaps. I have an undergraduate business degree; that education taught me how to build-up commodity costs into a selling price accounting for both the cost of goods sold, costs of product delivery and a profit margin. Beyond that I also worked for 10 years as a real estate appraiser, learning the methods for estimating economic lives, and the retrurn on and return of capital investments. All that experience would make me suspicious of my theory but for the wide spread opinion on this board that CE's price does not track the commodity price of natural gas--CE's pump prices have increased significantly even in times when the natural gas commodity prices were either flat or falling. That apparent disconnect from the market is what led me to consider other alternatives.

Until about six months ago I tracked my CNG cost, CNG fuel economy (read MPGGE), and comparable gasoline costs for every fill-up over a four-year period. When the dispensers were out of receipt paper, I would write the fueling data on the back of other receipts.

My 1997 crown vic traveled 37779 miles between the time I bought and sold it, consuming 1964.1 gge, or an average fuel economy of 19.23 mpgge (not bad for a car with 150,000 miles on it when I acquired it). During that time many of my fuel purchases were from either the City of Long Beach (pre-CE) or CE itself. To track my "fuel cost savings", I would also compare the price of each fill-up with the Valero station near my home. On the days I bought CNG fuel I would also track that day's gasoline price.

It was my analysis of that data, along with CE's drop in price to around $1.00/gge when gasoline recently fell to a four-year low (a price that I suspect was lower than CE's commodity and compression costs), that led me to my theory that CE prices their CNG at gasoline less 50¢.

Again, this approach does seem too simplistic. In my opinion, however, it is a reasonable formula that works given this data set.

TC

[cngmike]

Re: CE Gouging has begun again

In discussions I had with Jim Hargner, he stated the CE price is based on the average Premium price of gasoline. Fleet discounts are based on a contracted discount below that price. The bigger guaranteed fleet purchase the bigger the discount. In dealing with Charley Asher one of CE's sales reps. I had a gentleman's agreement regarding a discounted purchase price for City employees. When the contract was signed the discounted price turned out to be the one on the pump. During my years in the business CE prices will rise multiple times a week but lower only the 1st. week of the month.

[tomdotstar]

Re: CE Gouging has begun again

Couple of things.

1. CE is not a public utility. They are a business in a capitalist system. You can call it GREED, but they want to make money. That's what businesses are supposed to do. I voted for Obama, but I am wondering whether we are losing sight of that.

2. As a greedy, capitalistic monopoly. Well, CD just isn't doing that great. They will announce earnings next week. They are expected to post a loss this quarter, like they posted a loss the quarter before that, and the quarter before that, and the quarter before that. So before you characterize CE as that rich guy smoking the cigar on the Monopoly card grabbing your money, well so-far it just isn't so.

3. I am not sure about this, but I think I read that Boone Pickens is completely out of CE and Westport Technologies.

4. Here's the real test. If dispensing natural gas is such an unbelievably profitable monopoly, where are the thousands of other greedy capitalists running to open additional stations to siphon off the excessive profit?

5. We love our NGVs and we are evangelists for the fact that they are clean, terrorism free, and (yes) cheap. But don't expect CE or Trillium or any private enterprise to be Snow White, ready to fill you up with a smile and a song.

[cngmike]

Re: CE Gouging has begun again

According to their web site T. Boone is on the Board of Directors

http://www.cleanenergyfuels.com/board.html

[tomdotstar]

Re: CE Gouging has begun again

cngmike,

I think your are right. Here is the site that suggested that Pickens was out as a shareholder. It sounded unreasonable to me, but I just reported what I read.

Both could be true, though. He could be a director but not a shareholder...

http://www.gurufocus.com/news.php?id=49588

"Sold Out: Clean Energy Fuels Corp. (CLNE)
T Boone Pickens sold out his holdings in Clean Energy Fuels Corp.. His sale prices were between $4.01 and $10.48, with an estimated average price of $6.7. "

[cngpizza]

Re: CE Gouging has begun again

Alright I am convinced, I will make my own,so i will not be at the whim of a utility company or private reseller. Help how many cubic feet of natural gas
go into a GGE? I need to do my calculations while negotiating with my natural gas reseller?

[Tom Stoflet]

Re: CE Gouging has begun again

Hi All:

I have just returned from a trip, so I have not had a chance to review and respond to these CNGChat comments to my comments a couple of days ago on this matter.

To be clear, my comments were not criticisms to CE, Pinnacle, Trillium or any "CNG fueler", as they all have at least one good purpose, e.g., to provide CNG fueling infrastructure. Granted, they could do this at a more favorable cost to consumers.

But more specifically, my comments were directed at a much bigger issue: The need for America to require the legislators to legislate a new business model, one that does not only not allow the energy commodity brokers to manipulate (i.e., artificially inflate) the prices of energy commodities, but for the legislators to have better oversight on organizations like FERC and others who seem to allow this excessive price gouging to the consumers. Then I would recommend other legislative changes as well. If these are unsuccessful, I would recommend we develop a Coalition between private and public CNG vehicle owners (us) to build our own stations, provided there is enough demand to subsidize the capital and O&M costs, such to the station is self sustaining and will generate enough revenue to pay for these costs plus a "reasonable" profit.

CONSIDER THIS (if you have not already):

The CNG price at Public fueling stations in Feb. 2008 in the SF Bay area were $1.80/GGE at CE stations; $2.12/GGE at Pinnacle stations; $1.70/GGE at Trillium stations, and $2.08/GGE at PG&E stations. PG&E provided the uncompressed natural gas (NG) to the stations at $0.89/GGE. The O&M cost of each station should not exceed $0.25/GGE to compress the NG to 3,600 psi, and then there is about $0.25/GGE for the federal and state excise taxes for each gallon sold. So in the SF Bay area, the base cost of CNG should not have exceeded in Feb. 09 $1.39/GGE! That of course does not include any reasonable profit, nor amortizing the capital cost to build the station. But on the other hand, the base cost does not in include (i.e., deduct) the $0.50/GGE excise tax credit each station owners receives from IRS on each gallon dispensed by the stations.

I’m sure I could do a similar analysis for Southern CA.

Then when you look at the raw cost of natural gas has declined from about $14-16/MM Btu to less to $4/MMBtu, and yet the cost of natural gas is not going down proportionally……

Well, I think you get the picture I’m trying to paint.

Either, we get the legislators to change the business model, or we quit buying CNG from these fuelers, and consider building our own stations. If you are interested, please let me know.

Tom
925-672-7976.

[tomdotstar]

Re: CE Gouging has begun again

I was exploring the possibility of creating an alternative method for cng refueling. You can see the thread I created called "Can cng be home delivered?" I was going down a co-op type structure that in some respects might be similar to what you were talking about.

After spending some time on the issue, I have concluded that it is just too costly to pursue my alternative model. But in any event, this effort has given me some respect for CE, Trillium and others who have actually taken the plunge and set up a fueling infrastructure.

It's pretty simple. Here's the word problem. If you can make $1 per gge, how many NGVs with 10 gge tanks would you need to fuel to pay for a 500,000 dollar fueling station? When you do the math, you see that it's hard to make this work.

I guess I am only willing to consider gouging when I see monopoly profits. For example, OPEC comes to mind. But when I see companies like CE that are losing money, I just can't go along with gouging as an accurate characterization. If gigantic profits were available, there are plenty of greedy capitalists who would swoop in to reap the profits. I might even be one of them.

Government has a role, but a limited one. Government should respond to the public policy issues that we create governments to solve. Things like national security, environmental issues, balance of payments concerns, and yes, economic monopolies.

In the context of CNG, the government could respond to all these issues by providing meaningful subsidies for fueling infrastructure.

CE reports their quarterly financial results this week. Let's see what they say. Plus there should be a publicly available conference call that will give us some additional information.

[Tom Stoflet]

Re: CE Gouging has begun again

Hi Tomdotstar:

I found your response interesting.

I think the use of the word "gouging" in this thread may have gotten some people too defensive, but according to Webster, one definition means "excessive", and not a monopoly as you may have suggested. And to that extent, I believe the intent of the person who first started this thread was accurate, to which I'll again try to make my issues more clear.

But first, with regard to your hypothetical CNG station, which is a little vague, I assume you mean you wish to make $500,000 a year in CNG sales with a $1 per GGE profit. Is that correct?

If it is, then it would equate, using your analogy, to about 137-10 GGE CNG vehicles fueling every day. That is not unrealistic.

In the station that I designed and managed, we hade over 200 CNG vehicle transactions every day. And we were still only using about 25% of the station's potential fueling capacity.

The cost to design, build and run the station is clearly one of the “chicken and egg." I would not recommend going into to any CNG station adventure without having at least one fleet to subsidize a portion of the costs. That is called marketing. Then after that fleet has committed, the station can be further marketed to expand its revenue potential.

However, I found your comment on your desire to be one those greedy capitalists also very interesting, and I’m sure there could be a whole separate thread on that subject alone.

But with regard to you comment that government must be limited, I must take exception. The problem with our current economic crisis most of us face now was caused by government, such as the deregulation of various standards and rules that let the free market run amuck, and now we have all the problems we have. A few took the money and ran, while the rest of the majority of us face the consequences of their actions. That is just so wrong.

And perhaps you wish only to reap the benefits that government provides, but do not want any of the responsibilities. I do not know, but if so, that would be improper too.

I'm also not sure what you mean by losses from CE, since you provided no examples.

But please consider this:

Most CNG stations are subsidized by government grants. That means tax payers are paying for station owners to build and operate these stations. Further, the station owners get tax credits on the fuel they dispense. I support all of this as incentives to get alt. fuel in the main stream.

What I'm suggesting where needed changes are required is to prevent the brokers from artificially manipulating (raising) the prices of energy commodities, because the price of these energy commodities is too high. And if that meant nationalizing these energy commodities, I would support it that with conditions too. Further, the other area that is needed is that alt. fuel vehicles must be mandated to the US government fleets, as well as to the county, state and local fleets. In this way, the OEMs might come back. But all of this needs to be done via legislation, not voluntarily.

We have a lot of work to do, and I encourage you to join the movement.

Tom