Politics » Politics Feature

GADFLY: The Other Gas Story

Has our "hometown" utility been doing a Slick Willie on us?


Bill Clinton, in his book My Life, explained that the reason he dallied with Monica was because he could. What he meant by that was that he had the opportunity and knew no one was going to stop him. The energy industry has obviously adopted that rationale.

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 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, our own local energy utility, MLG&W, has predicted an imminent 71% increase, based on government estimates which are, in turn, based on — you guessed it, what the gas companies tell it. 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 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., MLG&W), have the unfettered ability to charge customers whatever they want.

The result has been a nearly 200 percent increase in the price of 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 (FERC) and the Commodity Futures Trading Commission (CFTC). 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 MLG&W charges for the gas it purchases and re-sells to its customers; so it's basically whatever the market (that’s us) will bear. Remember the winter of 2001, when some folks got bills that were two or three times the normal charge?

MLGW has been profiting quite nicely, thank you. According to its annual reports, the utility’s margin on 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 us, its customers (and, not coincidentally, also its owners), at the lowest possible rate. MLGW tells us it hedges against the increased cost of gas by speculating in the futures and spot markets (manipulated though they may be), but does it look to you like it's passing that savings along to us?

Even though MLGW has known for many months (precisely because it's 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 heating bills that may shock us even more than the ones in 2001 did.

MLGW levies a “purchased gas adjustment” charge on us that has, on occasion, actually exceeded the cost of the gas we've consumed, and then it stealthily stops itemizing that charge on our bills so we can't actually see how dramatically that charge jacks up our bills. Then, to top it all, it gives us little more than two weeks to pay our bills, and if we don't, it tacks on a charge that would be considered usurious even in the 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. With third quarter earnings about to be announced, with a recent survey showing that 90 percent of Americans believe they're being gouged, and with bills being introduced in Congress to levy an excess profits tax, the oil companies are dong 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.

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