Per Robert Goldman's comments below: It's complicated, but pretty logical, yet not entirely obvious. I'll try to keep it simple. If interested, read on... otherwise move on, you'll be bored or lost.
> They recoup their costs through a mixture of fixed price > + per-therm charges. I don't think that it's entirely obvious to > decide which is which. In general, commodity costs are variable... firm pipeline capacity is always fixed. Principal issues argued before the Public Utility Commission (MN PUC) center on allocation of fixed/variable costs over customer classes of service... not so much on the cost of gas, which is passed through to customers directly. > Also, note that curtailable services aren't going to be cheaper PER SE > than firm --- indeed they must involve some logic that is not going to > be free, and so must be at least as expensive as the kind of simple > flow-through that's all you need for firm delivery. The savings on > curtailable supply is NOT in the delivery cost, it's in being able to > manage the commodity cost. Yes and no. First off, to avail yourself of interruptible supplies, you must have alternate fuel capability... added costs. Secondly, curtailable (interruptible) delivery service is cheaper than firm service. With firm service, you are basically paying for uninteruptible pipeline and distribution system capacity-- the ability to get the gas delivered (from wellhead to burnertip) when pipeline and distribution capacity is at limit. There is only so much firm capacity available- without added capital investment for additional capacity. If demand is growing and capacity is limited, firm rates will rise. If they get too expensive, it's possible that regulators might order that capacity be added, slowing or placing downward pressure on fixed charges associated with firm capacity, as the new capital charges are depreciated over many years. And if the commodity cost of gas gets excessively high, an alternate fuel may be cheaper... and dirtier to burn... decisions to switch fuels are made on cents/MMBTU. The commodity cost of gas varies daily or monthly and seasonally, ranging from maybe $3/MMBTU in summer to maybe $15/MMBTU on the coldest days in January. Interstate/intrastate pipelines and local distribution fixed/variable costs are additional charges, and may vary seasonally as well. Sometimes even the commodity cost of gas will vary depending if it is guaranteed firm or is an interruptible supply-- before you even get it into a pipeline. If it is uninterruptible you will pay a premium, otherwise you may lose the supply if it's interruptible and demand increases and other customers offer a higher price-- again, that's before it even gets into a pipeline. Once in the pipeline then you worry about pipeline capacity and your rights to that capacity, and costs. There are fixed/variable costs associated with pipelines delivering to Center Point, and there are fixed/variable costs associated with distributing the gas in Center Point's system. If the customer is buying the natural gas from Center Point, the commodity cost of gas is a direct pass through to customers... no mark up! Fixed and variable costs are allocated to various customer classes according to the common usage patterns of the customer class. Additionally, large customers may be purchasing the commodity directly from a gas producer in TX or Canada, and paying their own transport to Center Point, in which case the customer pays one distribution charge to Center Point (based on Center Point's fixed/variable cost allocation and the customer's class of service- i.e. large or small volume firm or interruptible), and other transport/commodity costs to someone else. > Another concern I have about this is that the revision in pricing will > tend to deter conservation (since a higher proportion of the price > will be paid whether one uses the commodity or not). Is that really a > policy we want right now? The commodity cost of gas has probably increased by 50% over past couple of years (on annual basis), while Center Point's operating costs have probably increased minimally over the past couple of years. Compare your monthly Center Point bill in July/August when a water heater is being used to the bill in Jan/Feb when the furnace is on... it's the commodity cost of gas that swings your bill up and down, not the O&M of the local distributor. The higher proportion of the bill during most of the year is the commodity cost, and conservation measures reduce the amount of the commodity needed. Residential customers pay for the commodity cost of gas based on a weighted average cost of gas (various suppliers, volumes and costs in a given month)... with no mark up on the commodity cost. There are also fixed and variable transport costs associated with getting the gas from the wellhead to Center point. Center Point then has it's own fixed/variable distribution costs which are add on. It's the allocation of Center Point F/V distribution costs (and those of pipeline suppliers) that are usually before the Public Utility Commission in rate case proceedings. Center Point's costs include typical operation and maintenance costs, labor, the costs associated with Center Point storage/peaking operations, fixed charges associated with capital in place, etc. These are the costs the PUC examines for prudence and then allow/disallow or negotiate. > Also, I fear that we'll all REALLY take it in > the neck after Center Point has moved more of its charges into fixed > fees, and then the per-therm rate skyrockets again.... The allocation of charges into fixed or variable categories isn't an arbitrary decision. The allocation of those F/V charges among customer classes is a blend of art and science... and that what is primarily examined by PUC. note-- In earlier life, I was the gas supply analyst at a major gas distributor and helped negotiate commodity procurement and interstate/intrastate transportation agreements (primarily interruptible) as the industry went through deregulation. Hope this helps for those interested. Michael Hohmann Linden Hills > -----Original Message----- > From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] > Behalf Of [EMAIL PROTECTED] > Sent: Sunday, December 05, 2004 2:07 PM > To: Mpls Forum > Subject: RE: [Mpls] Property taxes for homestead property mustINCREASE > [Really CenterPoint price increase] > > > >>>>> "MN" == Michael Hohmann <[EMAIL PROTECTED]> writes: > > MN> Dorothy J. TItus states, in part... > >> ...And now Center Point Energy proposes a gas rate hike that > >> will raise residential gas costs by 4% while raising business costs > >> by only 1%. And this comes on top of gas prices that are reported > >> to be between 30-50% higher than last year. > snip REMINDERS: 1. Think a member has violated the rules? Email the list manager at [EMAIL PROTECTED] before continuing it on the list. 2. Don't feed the troll! Ignore obvious flame-bait. For state and national discussions see: http://e-democracy.org/discuss.html For external forums, see: http://e-democracy.org/mninteract ________________________________ Minneapolis Issues Forum - A City-focused Civic Discussion - Mn E-Democracy Post messages to: mailto:[EMAIL PROTECTED] Subscribe, Un-subscribe, etc. at: http://e-democracy.org/mpls
