Effectively Managing Natural Gas Costs

326 Pages·2005·3.809 MB·English

by  John M. Studebaker

E M
FFECTIVELY ANAGING
N G C
ATURAL AS OSTS
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E M
FFECTIVELY ANAGING
N G C
ATURAL AS OSTS
B
Y
J M. S
OHN TUDEBAKER
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Library of Congress Cataloging-in-Publication Data
Studebaker, John M.
Effectively managing natural gas costs / by John M. Studebaker.
p. cm.
Includes index.
ISBN 0-88173-499-3 (print) -- ISBN 0-88173-500-0 (electronic)
1. Natural gas--United States--Rates. 2. Natural gas--Law and
legislation--United States. I. Title.
HD9581.U5S819 2005
338.2'3285'0973--dc22
2005040621
Effectively managing natural gas costs / by John M. Studebaker
©2005 by John M. Studebaker. All rights reserved. No part of this publication
may be reproduced or transmitted in any form or by any means, electronic or
mechanical, including photocopy, recording, or any information storage and re-
trieval system, without permission in writing from the publisher.
Published by The Fairmont Press, Inc.
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Distributed by
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Distributed by
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E-mail: [email protected]
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1
0-88173-499-3 (The Fairmont Press, Inc.)
0-8493-3909-X (Taylor & Francis Ltd.)
While every effort is made to provide dependable information, the publisher, authors, and
editors cannot be held responsible for any errors or omissions.
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T C
ABLE OF ONTENTS
CHAPTER 1 Natural Gas—An Overview............................................ 1
The natural gas scenario............................................................................... 1
What is natural gas ....................................................................................... 2
Miscellaneous information about natural gas..........................................4
Deregulation in the natural gas industry ................................................. 7
Natural gas restructuring summary......................................................... 10
Regulations/laws that affect the production/supply segment ..........13
Regulations/laws that affect natural gas pipeline companies............16
Regulations/laws that affect local distribution companies.................17
U.S. gas market changes over the last decade ...................................... 17
Units of measurement................................................................................. 31
Synopsis......................................................................................................... 31
CHAPTER 2 Regulation of Natural Gas
Local Distribution Company (LDC) ...............................................33
Natural gas – the plentiful fuel ................................................................33
Intrastate regulation (within the states) .................................................. 35
Federal entities ............................................................................................ 45
Interstate regulation (between states)......................................................46
The Influence Intrastate Regulation has on Natural Gas Costs......... 47
The natural gas regulation process ..........................................................53
Major intrastate natural gas LDC’s..........................................................53
Synopsis......................................................................................................... 69
CHAPTER 3 Developing a Strategy for Reducing
Natural Gas Costs..............................................................................71
Producing a cost reduction strategy ........................................................ 71
Basic LDC data needed ..............................................................................72
What is an Applicable Tariff or Rate Schedule?.................................... 78
Sales tax and economic development enterprise zone data ............. 105
Unregulated engineering service company (ESCO) programs..........117
Why is reducing natural gas costs so complicated..............................118
Synopsis....................................................................................................... 120
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CHAPTER 4 Understanding the Natural Gas
LDC Billing Process.........................................................................121
The natural gas LDC billing process.....................................................121
Natural gas billing example – LDC full serving billing....................122
Natural gas billing example – LDC delivery service.........................130
Marketer natural gas billing example –
marketer natural gas delivery service..........................................141
Synopsis .......................................................................................................148
CHAPTER 5 The Natural Gas Process .............................................149
Natural gas – from exploration to customer burner tip....................149
Exploration ..................................................................................................149
Extraction.....................................................................................................151
Processing natural gas ..............................................................................152
Interstate transportation............................................................................153
Intrastate natural gas pipelines...............................................................154
Natural gas storage ...................................................................................156
Intrastate transportation distribution.....................................................159
Classes of natural gas service..................................................................161
Alternate/backup fuel systems...............................................................166
Natural gas deregulation..........................................................................183
The purchase of deregulation natural gas............................................185
Quantitative data required to evaluate an
agent transportation contract.........................................................190
Interstate transportation – routing and cost.........................................191
Necessary items on agent’s billing to customer..................................196
Synopsis .......................................................................................................198
CHAPTER 6 The Deregulated Natural Gas
Agent Contract Process...................................................................199
Contract processes .....................................................................................199
How to establish a fixed price for natural gas....................................206
The best contract for the customer ........................................................235
The RFP process.........................................................................................236
Synopsis .......................................................................................................240
CHAPTER 7 Billing, Nomination, Balancing,
and Hedging Procedures ................................................................241
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The monthly billing process—
nomination and balancing procedures.........................................241
Hedging strategies..................................................................................... 257
Synopsis....................................................................................................... 266
CHAPTER 8 Choosing a Natural Gas Consultant......................... 267
The natural gas consultant.......................................................................267
Establishing a natural gas cost reduction program............................270
Natural gas bill auditors ..........................................................................277
Synopsis....................................................................................................... 280
CHAPTER 9 Analyzing Your Facility for Natural Gas Savings..281
Putting all of the information to use.....................................................281
The natural gas evaluation process........................................................283
Details of a thorough natural gas facility analysis.............................290
Items to consider when analyzing for natural gas
savings opportunities.......................................................................290
Synopsis....................................................................................................... 292
CHAPTER 10 Synopsis of Natural Gas..............................................293
Summary of natural gas cost reduction strategies..............................293
Comparison of natural gas costs with electricity costs......................294
What customers need to do to reduce natural gas costs ..................298
Synopsis....................................................................................................... 301
CHAPTER 11 Glossary of Natural Gas Terms..................................303
INDEX..........................................................................................................313
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A
CKNOWLEDGMENTS
The following entities provided valuable insight and information
utilized in the development of this manual. Numerous LDC, state and
federal agency data was evaluated in the compilation of this project. The
use of these information sources greatly enhances the value of this pub-
lication to its readers.
• American Gas Association (AGA)
• American Public Gas Association
• United States Department of Energy (DOE)/(EIA)
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