Having seen how successfully it could artificially spike the price of gasoline during the past two months by using everything from hurricanes to China as an excuse, the energy industry is about to do it to us again. Only this time the commodity is natural gas.
In a supplement stuffed into its September bills, MLGW has predicted an imminent 71 percent increase in natural gas prices based on government estimates, which are, in turn, based on -- you guessed it -- what the gas companies are saying. And what's our hometown utility doing about it? Telling us to put on another pair of socks.
We have come to realize that oil companies have been profiting excessively at our expense (gouging us, to put it bluntly). The same is true for the natural gas industry, most of which is also owned by oil companies. Thanks to deregulation and the virtual elimination of price controls at the local and -- at least in Tennessee -- state levels, gas production and transmission companies, as well as the retailers of gas (e.g., MLGW), have the unfettered ability to charge customers whatever they want.
The result has been a nearly 200 percent increase in the price of natural gas since 1999.Though the price of gas has been deregulated, the markets for gas are still, to a limited extent, controlled by two federal agencies, the Federal Energy Regulatory Commission and the Commodity Futures Trading Commission. So it should tell us something quite profound that even with that limited authority, and even though those agencies are populated by appointees of an oil-and-gas-besotted administration, they have levied more than $2 billion (yes, that's billion, with a "b") in fines against gas companies in just the last three years for manipulating the natural gas market.
The manipulation of energy markets has a vivid recent history. Remember Enron? It succeeded in ripping off California's electric power consumers to the tune of $9 billion. Energy rip-offs aren't hard to perpetrate, given the absence of competition and the unlimited elasticity of consumer demand.
As for MLGW, the only check on what it decides to charge for gas is the City Council's oversight of its budget. As a practical matter, however, the City Council has little to say about what MLGW charges for the gas it purchases and re-sells to its customers. So it's basically whatever the market (that's us) will bear.
MLGW has been profiting quite nicely, thank you. According to its annual reports, the utility's profit margin on natural gas sales during the past several years has been between 27 percent and 42 percent. Not bad for a publicly owned, supposedly not-for-profit utility that's supposed to provide for its customers (who are also its owners) at the lowest possible rate. MLGW says it hedges against the increased cost of gas by speculating in the futures and spot markets, but with those profit margins, it doesn't look like it's passing those savings along to us.
Even though MLGW has known for many months (precisely because the company is in the futures market) that it would be dramatically jacking up our bills, it waited until September to tell us -- leaving us virtually no time to budget for increased heating bills.
MLGW levies a "purchased gas adjustment" charge that has, on occasion, exceeded the actual cost of the gas we've consumed. Now it has stealthily stopped itemizing that charge on our bills, so we can't see how dramatically that charge impacts our bills. Then, to top it all, if we don't pay on time, MLGW tacks on a charge that would be considered usurious even in states where credit card companies have hijacked interest rates.
Sooner or later, the chickens will come home to roost for the oil and gas companies. Meantime, us clucks will just have to go find those extra socks.
P.S. Don't be fooled by the recent "drop" in gasoline prices. The oil companies are doing their best to blunt the consequences of what will soon be announced as record profits. Be assured: This drop in gasoline prices is temporary. By the time winter is over, we'll have used up some extra shoe leather too.