This page was last updated on February 14, 2012.
Smoke coming from gas company; Pete Kelley; Beaver County Times; February 12, 2012.
Mr. Kelley has written at least five letters since 2008. The only one of those letters I critiqued is here.
Below is a detailed critique of the subject letter.
“The various gas companies advertize natural gas as the clean, efficient energy source. Lately though there’s been a lot of smoke coming from the offices of Columbia Gas Co.
“Last summer they announced the cost of natural was going to increase due to lower supplies (smoke). A month or so ago, in an article in the Times, Columbia Gas announced they were lowering the cost of natural because of the mild winter resulted in an excess of natural gas in storage (smoke). The other day they announced they were going to change the method of charging for gas consumption.”
[RWC] I don’t know where Mr. Kelley got his info because Columbia Gas announced rate cuts in both July (for the third quarter of 2011) and September (for the fourth quarter), not increases.
“Presently, we pay several different rates based on the volume of gas used (smoke). Now they are going to charge by the number of Btus used. More smoke.”
[RWC] I don’t know what Mr. Kelley meant by “we pay several different rates based on the volume of gas used.” The pricing shown by the PA Office of Consumer Advocate for Columbia Gas indicates a flat residential rate, not “different rates based on the volume of gas used.” Could Mr. Kelley be referring to the different rates available depending on the gas provider?
“What happened to all the surplus gas? How does Columbia Gas pay for the gas? Volume? Btu? The cost of natural gas, or any public utility, should be no more than the cost of manufacturing, plus the transmission and distribution costs. The cost of manufacturing should include the projected costs for replacements and exploration. All of these costs are based on volume.”
[RWC] Depending on their individual circumstances and the profit margin they can live with, when there is “surplus gas” on the market producers usually go with a combination of price and production cuts just as any other business. Then again, if a producer has a large enough cost advantage over his competitors he may cut his price and increase production if he can.
According to a FAQ on the Columbia Gas website, “When Columbia Gas purchases gas in the wholesale market place, it is measured in decatherms, which is more easily converted to therms than Ccf or Mcf.” A therm is 100,000 BTUs and a decatherm is 10 therms (1,000,000 BTUs).
In case you missed it, Mr. Kelley told us supply and demand should have no effect on the price of NG.
“The gas drillings, gas lines and storage facilities don’t care if if [sic] the gas has 1 Btu or 2 Btus. The sizes of these facilities are based on volume.”
[RWC] Yes and no. Volume comes into play when designing NG facilities (producing, pipelines, storage tanks), but so does the BTU content. To transport/store the same amount of energy, lower-BTU NG requires larger transport/storage facilities than higher-BTU NG because you need more volume. Take a look at your gas appliances and you’ll see they are rated using BTUs/hour, not cubic feet.
“Columbia Gas spokeswoman Rachel Ford is just blowing more smoke when she says, ‘That way it will be most accurate.’ It will be most beneficial to the high rollers in the gas company. Where is the PUC when we need them?”
[RWC] As for the Ford comment, it was in reference to the topic in the previous paragraph in the BCT article that said, “Btu [content] will be recalculated each month for each of the company’s eight zones in its 26-county coverage area.”
The PUC approved the billing change. According to KDKA, “the Pennsylvania Public Utility Commission in approving the change made it clear the billing change cannot mean the gas company charges its customers more.” What this means is while individual customers will see higher or lower bills, the PUC said the change can’t result in an overall revenue increase for Columbia Gas.
Other than Mr. Kelley’s apparent belief the switch to BTU-billing is a scam to increase NG prices, why would anyone object? After all, though they currently pay the same rate per Mcf, for the same amount of energy a customer receiving lower-BTU NG will have a higher bill than the customer receiving higher-BTU NG.
Did Mr. Kelley do any research before he sent this letter?
© 2004-2012 Robert W. Cox, all rights reserved.