Deregulation Brings Competition, Opportunities, to Natural Gas- Dec 1997

Deregulation Brings Competition, Opportunities, to Natural Gas- Dec 1997

YJay Draiman, Director of Marketing

In the mid 1980s the Federal Government deregulated the Natural Gas Industry in a similar manner to the deregula¬tion of the telephone industry twenty years prior.
Subsequently, many independent companies started marketing and transporting natural gas. At the onset, many end-users were skeptical. As time went on many large and small end-users subscribed to a transportation gas pro¬gram. With such a program the Supplier delivers gas to the local distributing company (LDC) who in turn delivers the gas to the end-user with charges for the meter and deliveries only. Many end-users saved 20-30% on the cost of natural gas and in many cases were able to eliminate the payment of tax on their purchase.
In the late 1980s the local public utility commission granted some LDC's the right to charge special tariffs to end-users who subscribe to gas transportation. Thereaf¬ter some small end-users had to withdraw from the pro¬gram because the new tariffs made the program less beneficial economically for end-users with low annual gas consumption.
As new tariffs went into effect, end-users had to choose which program would be appropriate for them: full back¬up or zero to variable back-up which saved more money but had the risk of penalty for non-delivery or under-delivery of gas during winter periods. End-users also had the choice of additional storage offered by the LDC's which,

when used wisely, could save more money. Also, group¬ing meters with the same LDC saved on administrative tariffs charged by the LDC and reduced the risk of penalty by allowing all meters to draw from one pool of deliveries.
In many cases recommendations were made to eliminate multiple meters within the same facility and save on meter and delivery charges by the LDC. While, these actions could save money even if the end-user was not on trans¬portation program, if the end-user is on a certain transpor¬tation program, the savings is enhanced even further.
In the mid 1990s certain LDC's programs started requir¬ing the end-user to provide a phone jack by the meter. The gas company then installed a remote reading device to re¬port the gas usage on a daily basis. This device was re¬quired for end-users who elected to be on zero or variable back-up. It cost an additional fee to the end-user and it also required the supplier to provide daily uninterrupted deliv¬eries. It also posed an additional risk that, if the supplier did not ship all the necessary gas daily, the LDC would charge a daily penalty for any shortage in deliveries.
Thereafter, the Federal Energy Regulatory Commission (FERC) completely deregulated the interstate gas pipe¬line industry (also known as FERC Order 636). This al¬lowed the Gas Utility Companies to renegotiate their long term contracts and reduce the cost to reflect current mar¬ket conditions.



Energy Conservation Methods:

1. Lighting retrofit
a. watt stoppers, occupancy sensors, timers, pho¬tocells, low resistance wires, low heat circuit breakers
2. Energy efficient motors
3. Energy management system (building automation) a. Electric demand meters with recording device
4. Gas air-conditioning
5. Co-generation
a. Solar energy (Wind energy Wave energy) b. Compressed Natural Gas for vehicles
c. The use of compressed gas for alternate supply and/or back-up
6. Thermal windows (caulking & tuckpointing) a. preventing and reducing wind effect

7. Thermal roofing (reflecting paint)
8. Energy efficient boilers
a. proper venting for flames, preventive mainte¬nance, constant calibration of controls, proper sensors, clean air ducts and verify the appropri¬ate size of flow and return ducts
9. HVAC systems, fresh air intake and exhaust systems
10. Humidifiers and De-humidifiers
11. Utilizing the run-off of rain-water for watering lawns, water-cooled air-conditioning, toilets and laundry
a. checking leaking pipes (water, faucets, toilet tanks, steam and return pipes
12. The auditing of utility bills for electric, gas, telephone (local, interstate, international, and cellular) and wa¬ter (sewer, and the use of rainwater)
Some Utility Companies will give incentives or rebates to end-users or participate in the cost for energy sav¬ings components and methods. ^



24/DIE CASTING ENGINEER




Again, after the mid 1990s, additional tariffs went into effect which reduced the amount of storage permitted by the LDC to the end-users. Pools were set up and bulletin boards were provided to end-users for a fee. Many end-users had to look for other options for additional storage such as pipeline storage and/or gas futures in order to as¬sure a reasonable price for transportation gas.
Turning now to the "cost" and related costs aspects of gas transportation. There are various ways suppliers charge end-users for the gas: index plus, futures plus, fixed price for twelve months or ten years, management fee or percent¬age of savings or a combination of the above. Some sup¬pliers do not guarantee reimbursement to the end-user for penalties charged by LDC for non-delivery, under delivery or over delivery of gas. The majority of companies that do guarantee reimbursement for penalties insert a force ma-jeur clause in their agreement with the end-user which many suppliers use arbitrarily for any reason whatsoever and eventually the end-user pays the penalty price.
The cost of gas is not everything. It is imperative that an end-user selects the supplier that can provide a guaran¬teed uninterruptible supply of gas, strong supply sources, program management, utility management and other var¬ied energy savings services.
Many end-users fail to compute the various charges the LDC's add to their gas bill for deliveries. They assume that the cost of the gas by the supplier is the sole cost, while if you add the various charges by the LDC associated with transportation gas, you'll find out that the cost is higher than originally perceived.
In setting up the account on the transportation gas pro¬gram, it is important to analyze the best and most economic way to install the phone lines for the meters and to effectu¬ate economic pooling charges and to group accounts in order to minimize costs.

In selecting your gas supply company you should verify the supplier's past performance, financial capabilities, and determine if your supplier will confront the local LDC and/ or the utility commission on your behalf in case of unjusti¬fied fees or charges, delays in implementations of programs, MDQ (maximum daily quantity allowed to be delivered daily) errors, unauthorized use, excess use penalty, wrong program billing, errors in delivery credits, etc. Check if the supplier is currently operating on the cutting edge of the latest technology available to the industry and can respond promptly to tariff changes and new innovations.
Pipeline capacity throughout the United States varies substantially. It is of utmost importance for the end-user to determine whether his supplier, or proposed supplier, has had any curtailments of gas deliveries in order to assess how to handle the deliveries of gas and what pro¬gram to select with the local LDC. In order for the end-user to assure an uninterrupted supply of transportation gas, the end-user may elect to procure from its' supplier firm transportation gas which increases the cost but guar¬antees the flow of gas.
In recent years various electric generating plants have converted or built new generators that use natural gas as their energy source. This has affected the cost of natural gas during the summer months when additional electric generating capacity is needed.
In 1997 new tariffs were implemented by the LDC's to al¬low small volume commercial customers to procure gas on the spot market. Some tariffs have been set to start flowing spot market gas to private residences as early as the Spring of the year 2000. The trend is to eventually eliminate your local gas utility company to procure gas on the consumers behalf, but only serve as a gas delivery company.
Currently, additional pipelines are being constructed.

which will bring additional capacity.