Meeting

Report

 
TOM SKAINS
Chairman, President and CEO Piedmont Natural Gas
By: Phil Van Hoy
 
Our April 13, 2004 speaker was Thomas E. Skains, Chairman, President and CEO of Piedmont Natural Gas, who was introduced by his employee, and our member, Hope Lanier. Tom is a native of Texas and was educated and employed in Houston, Texas, the gas capital of the world, until moving to Charlotte in 1995 to join Piedmont Natural Gas. He is married and has three daughters, and is very active in Charlotte civic affairs, as is typical of major Charlotte executives.
 
Piedmont Natural Gas, an energy services company, was formed in 1961, and has been headquartered in the Southpark area for the last twenty-four years. Its service area includes parts of Tennessee and North and South Carolina. It is the second largest natural gas company in the Southeast, after acquiring North Carolina Natural Gas, and expanding its service area to Eastern North Carolina, in 2003. Its entry into Eastern N.C. has allowed fourteen counties which previously had no natural gas supplies to be serviced.
 
The Company has 2,155 employees, and 940,000 customers. The Company does business Down East as North Carolina Natural Gas, and in the Nashville area as Nashville Gas. The Company also has a joint venture in Georgia for gas distribution only, since Georgia law does not allow gas public utilities there to horizontally integrate.
 
Piedmont Natural Gas paid an annual dividend of $1.65 per common share in 2003, which was the twenty-fifth straight year in which the dividend was increased. Its common shares are doing well, now that investors have returned to quality stocks with good balance sheets, after the debacle in the dot com stocks of 2000-2003. The Company's stock has averaged an annual increase in value of sixteen percent over the last twenty years, assuming reinvestment of dividends. As part of the Company's sense of civic duty, every Company officer is on the Board of at least one Charlotte-area non-profit.
 
In contrast to the electric utility industry, the gas industry is segmented instead of horizontally-integrated. Exploration, pipelines, power generation, and retail distribution are conducted by separate business entities.
 
Beginning in 1978, gas prices at the well head have become deregulated; the other steps in the chain of delivery to customers continue to be regulated by the federal government and the utilities commissions of the states. The other unrelated aspect of the natural gas business is the sale of gas in the commodities market through energy brokers.
 
At the retail level in which Piedmont Natural Gas operates, there is a direct pass-through of the Company's costs to its customers, without mark-ups other than to cover overhead and a fixed profit margin. Thus, the Company can make more money only by increasing its sales, which are dependent on adequate supplies.
 
The reliability of product delivery for natural gas is higher than for electric energy, since the natural gas delivery systems are underground. Charlotte residents learned this reality during Hurricane Hugo and the 2003 ice storm, which resulted in the interruption of electric power but not natural gas delivery.
 
Natural gas supplies in the U.S. are not meeting demand, which continues to increase due to pricing advantages over other energy sources, increases in uses and numbers of customers, and environmental considerations. Natural gas burns cleanly and is not subject to damaging spills -- since it is lighter than air; leaks dissipate harmlessly into the atmosphere.
 
Gas supplies are not meeting demand, even though indigenous sources of gas are available, due to the lack of a national energy policy. Major parts of the United States are off-limits to gas exploration and production due to government fiat, including the Rocky Mountains and the off-shore areas of the Florida Gulf Coast, the entire East Coast, and the entire West Coast. Our lack of indigenous exploration causes us to be more dependent on foreign sources. Fifteen percent of pipeline-supplied gas used in the U.S. comes from Canada. An increasing percentage is shipped from other countries as liquefied natural gas ("LNG").
 
There was a major effort in the 2003 Congress to pass a comprehensive national energy policy, which passed the House but failed in the Senate by two votes after the bill was laden with non-germane pork-barrel spending to sabotage its passage. America remains more and more dependent on foreign energy sources as our demand increases and we are not allowed to increase domestic supply to meet this demand. This "hidden tax" resulting from higher energy prices causes higher consumer prices, less discretionary income, and a concomitant adverse effect on the American economy.
   
Head Table:
Susan Hutchins, Carroll Thomas, Tom Robertson, Hope Lanier; Mike Parrott, Pete Larson; Invocation: Tony Zeiss
 
Visitors and Guests:
Edgar Love; Health & Happiness: Roger Sarow; Music, David Erdman
         
 

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Attendance Record 4/13/04 4/15/03 visitors & guests 14 18 club members 182 177 total attendance 196 195 Wedding Anniversaries 20 Joni & Aaron Davis 22 Mary & Hugh Cathey 24 Dianne & Jesse Hite 25 Pauline & Steve Carter 25 Dot & Martin Waters 27 Gail & Will Pleasants 27 Barbara & George Price      New Members | Resignations n/a Andy Calhoun   Roaming Rotarians n/a Birthdays and Birthplaces 24 Jim Haney, Charlotte, NC 26 Ronnie Pruett, Mt. Airy, NC 26 Biff Virkler, Philadelphia, PA 26 Natalie English, Cabarrus Cty

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