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"You have stretched the rubber band ... as much as you can," says an analyst, not expecting...

"You have stretched the rubber band ... as much as you can," says an analyst, not expecting utilities to switch from coal to natural gas much more after coal accounted for just 37% of electricity production in February (46% a year ago). Cheap gas can actually hurt some power producers as it drives down wholesale prices faster than costs.
Comments (16)
  • Gas prices for consumers tend to be "sticky", that is, it easier to get a rate increase from the utility board than it is to cut the rate.

     

    I am seeing freezes proclaimed by utilities as a preventative measure to avoid rate decreases. In this economic environment where consumer power is minimal, I don't fear decreased utility earnings due to falling gas prices, but rather an earnings upside where coal is replaced by gas or where coal contracts are renegotiated.

     

    But, watch rail volume for decreases in coal tonnage.
    7 May 2012, 10:19 AM Reply Like
  • They are selling our energy to China......our coal reserves...and Nat gas was at one time 12$.....and it will be again...we did the same thing in the 90´s...remember Calpine....and NRG.....change everything over to gas...then gas skyrockets....same old story...different time
    7 May 2012, 10:28 AM Reply Like
  • Except this time we are producing a record amount of natural gas and quickly running out of places to put it. They burn it off in North Dakota just to get rid of it. Wouldnt it make more sense to burn it off and produce electricity, rather than nothing?
    7 May 2012, 03:10 PM Reply Like
  • not if you need infrastructure in place to capture, store, and transport. cheaper to flare.
    7 May 2012, 04:23 PM Reply Like
  • The EPA has already said they are going to stop giving out permits to flare. The gas comes out of the ground alongside oil, its essentially free, and if nothing else if it can be sold it adds to reserves, which often will increase a company's borrowing base.
    7 May 2012, 06:06 PM Reply Like
  • Mike - can you cite the EPA guidance for Bakken flare gas? I was unaware of that.
    7 May 2012, 06:11 PM Reply Like
  • I forget where I read it, but it was more of a warning that the process was not sustainable. ONEOK should have the infrastructure in place by this time next year to gather a large portion of the gas. The woman from ND's Department of Mineral Resources says flaring should drop from 30% of ND gas to 10% in the next couple of years in the article below.

     

    http://cbsn.ws/JcaJgc
    7 May 2012, 06:58 PM Reply Like
  • Thx Mike.
    8 May 2012, 09:08 AM Reply Like
  • Inventories are huge while demand is low, it will take a while to burn through stocks and generate demand for all the product that's been coming online the last 3 years.
    7 May 2012, 11:14 AM Reply Like
  • Utilities are strange creatures. The savings are never passed on and then when natural gas prices go back up to coal prices they will argue they need a 33% price increase on consumers to cover the cost.
    7 May 2012, 12:31 PM Reply Like
  • Absolutely!
    7 May 2012, 02:55 PM Reply Like
  • Proof that government interference in markets does not lead to lower prices. More stable in this case, but not lower.
    7 May 2012, 03:08 PM Reply Like
  • A lot of utilities simply pass the cost of fuel through to customers via "Fuel Clauses". They make no money from fuel. They have increases in rates as fuel goes up and they have decreases in rates as fuel goes down.
    8 May 2012, 05:03 PM Reply Like
  • I live a province in Canada where our natural gas company is publicly owned and we regularly get decreases in our natural gas rates. Our automobile insurance company is also publicly owned and our rates are the cheapest in North America. This also true for our telephone rates and electricity. The province is called Saskatchewan and our unemployment rate is less than 5% with a booming economy. (and our health care is free) All this without private enterprise!
    7 May 2012, 06:06 PM Reply Like
  • POT and MOS would disagree with you that there is no private enterprise in Saskatchewan
    7 May 2012, 06:08 PM Reply Like
  • I live in BC where we get shafted by the BCAA on insurance rates, customer service and payouts because there is no competition.
    7 May 2012, 08:05 PM Reply Like
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