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The high cost of low sales volume

John Colson
Post Independent staff
Glenwood Springs, CO Colorado

Some area residents are wondering why the new compressed natural gas filling station in Rifle is charging about a dollar more per gallon than other CNG stations around the state.

According to an Internet website, CNGprices.com, Kirk Swallow’s Shell station in Rifle is charging the highest price in Colorado for CNG – $3.35 per gallon.

Roy McClung, a former mayor of Parachute, wrote in a letter that while he is supportive of the idea of using natural gas to fuel vehicles of all kinds, he is not happy about Swallow’s pricing policy.



“By my quick and not quite exactly scientific calculations, Mr. Swallow’s Shell station is in the top five most expensive CNG stations in the world,” wrote McClung, after conducting research on the Internet.

Most prices around the state hover around $2.40 per gallon.



The only higher price in three other Western states – Utah, New Mexico and California – was in Napa, Calif., where CNG brings $4.25 per gallon, according to the website.

Swallow, who first began selling CNG in March, said his price is high for three reasons: a low volume of sales, a comparison to stations operated by government agencies, and high electric bills to run the natural gas compressors.

Swallow said he is selling only about 60 gallons of CNG per day, a volume that he hopes will increase so the price can drop.

“We need about six vehicles a day to break even” at his current prices, he said, adding that he is about at that level now.

Some CNG outlets that charge lower prices – such as stations in Utah that charge as low as $1.02 per gallon, and the new one in Grand Junction that charges $1.99 – are owned by governmental entities. They may be able to subsidize or absorb some costs differently than a private sector station.

Meanwhile, Swallow was surprised to receive astronomic bills from Xcel Energy for the electricity used to power the compressors and other equipment used in this specialized business.

He said one bill for about a month of power came in at $6,900, and a subsequent bill covering 15 days came in at $2,500.

Swallow, who said he is as frustrated by the situation as anyone, noted that before Christmas in 2010 he drove to Arizona in a CNG vehicle, and paid 95 cents a gallon at a station there.

“I thought, hey, this is great,” he recalled, thinking he would be able to run his business, make a profit and charge prices matching those of the market.

Then came the realities of running the equipment, he explained.

“Obviously, something like this is not going to happen without a few glitches,” he said.

He said he is trying to modify the motors that run his compressors, to reduce the amperage they pull and thereby cut his power requirements from Xcel.

He has other ideas, but in the meantime, he explained, “I go to the refinery, and gas costs me $1.50 a gallon before I even have compression costs, or taxes, or profits.”

Faced with the lower prices at other stations around Colorado, some of whom pay Xcel for their electricity, Swallow said, “I don’t have a clue how they’re doing it.”

A spokesman for Xcel said he was unsure whether Swallow’s electric bills are too high, or whether they are the reason he is charging more than other CNG outlets.

“His rates aren’t any higher than any other CNG service in the state,” said Mark Stutz, media relations official for Xcel, adding, “It would not be the first time that a company blamed their problems on their energy charges, and it won’t be the last.”

Stutz said he will look into Swallow’s situation to see if there is anything Xcel can do about it.

jcolson@postindependent.com


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