What Everyone Should Know About Natural Gas

Report
A DAY IN THE LIFE OF A NATURAL
GAS UTILITY
Wisconsin Public Utilities Institute
Energy Utility Basics
Friday, October 5, 2012
Kenneth W. Yagelski
About UGI

UGI Corporation (NYSE: UGI), through its subsidiaries, distributes
and markets energy products and related services around the world

UGI Utilities distributes natural gas and provides electric service to
customers in eastern, northeastern and central Pennsylvania.

UGI Energy Services markets natural gas, propane and electricity to
commercial and industrial customers in nine states in the northeast
U.S.

UGI Energy Services owns a variety of assets that support the
storage, transportation and delivery of natural gas and electric
generation assets in Pennsylvania.

UGI was founded in 1882, bringing 130 years of trusted energyrelated experience to millions of customers
2
Disclaimer

Numeric values are provided for illustrative purposes only and may
not represent actual data associated with any specific company.

Processes and strategies are presented for educational and
discussion purposes only and are not necessarily intended for
implementation in this form.

Numeric values, processes and strategies are subject to change and
may not represent the past, current or future plans for any specific
company.

Materials represent the opinion of the presenter and not necessarily
those of UGI Corporation or UGI Energy Services.
3
Keeping The Pipes Full
4
What Every Natural Gas Utility Wants

Reliable natural gas service

Investor confidence

Earnings growth strategy

Accounting compliance (Sarbanes – Oxley, Dodd – Frank)

Cost recovery and regulatory approval

Regulatory compliance (local and federal)

Revenue protection through price management

Efficient operation of the process and system
Daily responsibility to deliver on these objectives,
but a process that requires long-term planning.
5
Demand Forecasting
6
Determining Design Day Demand

Assess a group of days with the highest firm demand.

Establish the firm demand base-use and then adjust for forecasted
meter growth or decline, and any known demand changes.

Use linear regression analysis to determine the weather-use per
Heating Degree Day (“HDD”)1 and verify accuracy through a backcast analysis.

Apply actual weather data to base and weather factors.

Typically based on historical data representing the coldest “recent” weather
experienced.

Example: The last 10, 20, 30 or more years… it depends.

Cold weather is relative, depending upon the LDC’s location. In the Midwest it
can be an average daily temperature of 15 degrees below zero, while in the
Mid-Atlantic it can be an average of 5 degrees.
1 – Used to estimate energy required for heating. One HDD occurs for each degree the daily
mean temperature is below 65 degrees Fahrenheit.
7
Forecasting Other Periods




Design Week

Develops an understanding of peak demand period duration and shape.

Helps establish on-system and off-system peak shaving requirements.
Normal Weather Winter

Represents the typical demand expected during a normally cold winter.

Helps determine the appropriate mix of capacity resources.
Most Severe Weather Winter

Represents the maximum demand expected during extremely cold winter.

Helps to make certain that there are sufficient capacity resources to meet
obligation to meet firm demand requirements.
Least Severe Weather Winter

Represents the minimum demand expected during extremely warm winter.

Requires a plan for complete utilization of seasonal storage inventory.
8
Capacity Resource Planning
9
Load Duration Curve
2,000
1,800
1,400
1,200
1,000
800
600
400
200
0
1
5
9
13
17
21
25
29
33
37
41
45
49
53
57
61
65
69
73
77
81
85
89
93
97
101
105
109
113
117
121
125
129
133
137
141
145
149
Demand (1,000 Dekatherms)
1,600
Days of Winter (November through March)
Total Capacity
Most Severe
Normal
Least Severe
10
Capacity Resource Portfolio

Combination of transportation, storage and peak shaving services
capable of meeting forecasted design day demand, while
economically serving normal demand.

Services selected with purposeful consideration of:


Long haul versus market area transportation.

Production area versus market area storage.

Storage and peak shaving service inventory capacity.
Requires careful analysis of all applicable costs associated with
holding contracts for capacity resources.
11
Pipeline Transportation
Image: Energy Information Administration
12
Pipeline Transportation
Image: Rextag
13
Pipeline Transportation
Image: Rextag
14
Natural Gas Pipeline System

The United States natural gas transmission capacity is about 150
billion cubic feet (“BCF”) per day (with some redundancy in
capacity)

About 71 percent are interstate pipelines (217,000 miles)

About 29 percent are intrastate pipelines (89,000 miles)

National peak daily demand is approximately 120 BCF per day

National daily production capability is about 66 BCF per day

Daily net import / export is about 5 BCF per day

Where does the remaining 49 BCF per day come from?
Source: Energy Information Administration and Interstate Natural Gas Association of America
15
Natural Gas Storage
Depleted Reservoir (326)
Salt Cavern (31)
Aquifer (43)
Interstate Pipeline
Intrastate Pipeline
Image: Modified from Energy Information Administration
16
Natural Gas Storage

Storage maintains reliability of gas supplies during periods of high
demand (both winter and summer).

Storage allows more effective use of pipeline transportation while
supporting operational load balancing.

Storage provides opportunities for Local Distribution Companies,
marketers and producers to leverage economic opportunities.
17
Capacity Moderating Factors

Physical realities moderate ideal plans.

Capacity and pressure limits for interstate pipeline system and the
LDC’s distribution system.

Capacity contract limitations reflect physical constraints and
operating requirements.

Relationship between hourly and daily volume limits.

Applicable costs associated with holding contracts for capacity
resources.

Total Annual Cost Per Daily Volume.


Places all services on a comparable basis.
Total Annual Cost Per Annual Volume.

Places similar services on a comparable basis.
18
Capacity Cost Examples



Transportation

10,000 dekatherms per day of Firm Transportation for 365 days at $10.00 per
dekatherm

Annual Cost per Daily Volume: $120.00 per dekatherm
Seasonal Storage

10,000 dekatherms per day of Delivered Firm Storage for 60 days with
storage cost of $3.00 per dekatherm and transportation cost of $5.00 per
dekatherm

Annual Cost per Daily Volume: $96.00 per dekatherm
Peak Shaving

10,000 dekatherms per day of Delivered Peak Shaving for 5 days at $18.00
per dekatherm

Annual Cost per Daily Volume: $90.00 per dekatherm
19
Load Duration Curve
2,000
1,800
1,400
1,200
1,000
800
600
400
200
0
1
5
9
13
17
21
25
29
33
37
41
45
49
53
57
61
65
69
73
77
81
85
89
93
97
101
105
109
113
117
121
125
129
133
137
141
145
149
Demand (1,000 Dekatherms)
1,600
Days of Winter (November through March)
Transportation
Storage
Peak Shaving
Most Severe
Normal
Least Severe
20
Capacity Resource Portfolio
(Volumes in Dekatherms)
Design Day Demand Estimate
Firm Transportation
Capacity Releases
Storage
Peak Shaving
Total Capacity
Reserve Margin
2012 - 2013
2015 - 2016
2020 - 2021
1,836,000
1,966,000
2,095,000
636,000
0
634,000
662,000
632,000
(10,000)
717,000
752,000
632,000
0
717,000
757,000
1,932,000
5.2%
2,091,000
6.4%
2,106,000
0.0%
21
Commodity Planning
22
Commodity Purchase Plan

Utilize a mix of various contract terms and volumes to most
accurately meet the dynamic requirements of customer demand.

Provide a variety of pricing mechanisms to help manage retail costs
and to mitigate wholesale price volatility.

Hedged Price: Base volume (long-term), Various (Fixed, Capped, etc.)

Seasonal Base: Base volume (mid-term), Various (Negotiated, Index, etc.)

Monthly Base: Base volume (short-term), First-of-Month Index

Swing: Daily (very short-term), Gas Daily Index

Spot: Daily (very short-term), RFP Negotiated
23
Commodity Price Hedging

Use a variety of hedging price mechanisms to help manage retail
costs and to mitigate wholesale price volatility.

Fixed Price: Commodity is set at a price that is locked for the period
of the contract with no premium.

Capped Price: Commodity has a maximum ceiling price, but no
minimum floor price; at a cost charged as an explicit premium.

Banded Price: Commodity has a maximum ceiling price and a
minimum floor price; at a cost reflected in the minimum price. Also
known as a costless-collar.
24
Commodity Planning Results
Weighted Average Cost of Gas
2% 1%
10%
23%
32%
$ 3.71 - Base
$ 3.84 - Hedged
$ 2.84 - Storage
$ 4.00 - Daily Swing
32%
$13.00 - City-Gate Delivered
$ 5.35 - Peak Shaving
$ 3.74 - Weighted Average
25
Commodity Source Diversity
26
Value of Commodity Source Diversity

Increases supply reliability by reducing reliance on any one
production area and avoiding loss of supply from single contingency
transportation disruptions.

Allows a mix of index pricing points to help manage retail costs and
wholesale price volatility.

Helps to manage counterparty risk by allowing several different
wholesale commodity marketers to meet a variety of hedged price,
seasonal base, monthly base, swing and spot requirements.
27
Commodity Source Diversity - Example
28
Commodity Source Diversity - Example

NiSource – Columbia Gulf
Transmission Hartsville
Compressor Station

Direct hit from an F5 tornado on
February 6, 2008
29
The Gas Day
30
Gas Supply Schedule

Prior to 9:00 a.m. (Central Time)

Study the weather forecast for the next day (i.e. On Monday, look at Tuesday,
or on Friday, look at Saturday, Sunday and Monday).

Forecast natural gas demand for the next day with schedule of actions to take
should the day’s plan be long (warmer) or short (colder).

Determine at which city gate locations and how much volume of supply will be
needed.

Determine where supply will be sourced from (i.e. Flowing, storage, or peak
shaving, and which provider).

Negotiate purchases of supply with specific receipt and delivery points.

Notify pipeline transportation and storage providers of the intent to use their
services within your contract arrangements with specific details.
31
Planned Versus Actual
32
Planned Versus Actual
33
Gas Control - SCADA
34
Natural Gas Safety
35
Natural Gas Safety
Material
Methane
Chemical
Formula
Specific
Gravity Air=1
Ignition Temp
Deg. F in Air
Lower Expl.
Limit (% gas)
Upper Expl.
Limit (% gas)
CH4
.55
1193
5.3
15.0
Natural Gas
Blend
.65
950-1200
5.0
15.0
Ethane
C 2H 6
1.04
993-1101
3.0
12.5
Propane
C 3H 8
1.56
957-1090
2.2
9.5
Butane
C4H10
2.01
912-1056
1.9
8.5
Hexane
C6H14
3.0
437
1.1
7.5
Gasoline
Blend
3-4.0
632
1.4
7.6
Acetone
C 3H 6O
2.0
869
2.5
12.8
Benzene
C 6H 6
2.8
928
1.2
7.8
CO
1.0
1128
12.5
74.0
H2
.1
932
4.0
75.0
H 2S
1.2
500
4.0
44.0
Carbon Monoxide
Hydrogen
Hydrogen Sulfide
36
CFR Title 49 § 192.5 – Class Locations
(1) A Class 1 location is:
(i) An offshore area; or
(ii) Any class location unit that has 10 or fewer buildings intended for human
occupancy.
(2) A Class 2 location is any class location unit that has more than 10 but fewer than 46
buildings intended for human occupancy.
(3) A Class 3 location is:
(i) Any class location unit that has 46 or more buildings intended for human
occupancy; or
(ii) An area where the pipeline lies within 100 yards (91 meters) of either a
building or a small, well-defined outside area (such as a playground, recreation
area, outdoor theater, or other place of public assembly) that is occupied by 20
or more persons on at least 5 days a week for 10 weeks in any 12-month
period. (The days and weeks need not be consecutive.)
(4) A Class 4 location is any class location unit where buildings with four or more stories
above ground are prevalent.
Source: Electronic Code of Federal Regulations
37
CFR Title 49 § 192.706 – Leak Surveys
Leakage surveys of a transmission line must be conducted at intervals not exceeding 15
months, but at least once each calendar year. However, in the case of a transmission
line which transports gas in conformity with §192.625 without an odor or odorant,
leakage surveys using leak detector equipment must be conducted —
(a) In Class 3 locations, at intervals not exceeding 7 ½ months, but at least twice
each calendar year; and
(b) In Class 4 locations, at intervals not exceeding 4 ½ months, but at least four
times each calendar year.
Source: Electronic Code of Federal Regulations
38
CFR Title 49 § 192.723 – Leak Surveys
(a) Each operator of a distribution system shall conduct periodic leakage surveys in
accordance with this section.
(b) The type and scope of the leakage control program must be determined by the
nature of the operations and the local conditions, but it must meet the following
minimum requirements:
(1) A leakage survey with leak detector equipment must be conducted in business
districts, including tests of the atmosphere in gas, electric, telephone, sewer, and
water system manholes, at cracks in pavement and sidewalks, and at other locations
providing an opportunity for finding gas leaks, at intervals not exceeding 15
months, but at least once each calendar year.
(2) A leakage survey with leak detector equipment must be conducted outside
business districts as frequently as necessary, but at least once every 5 calendar
years at intervals not exceeding 63 months. However, for cathodically unprotected
distribution lines subject to §192.465(e) on which electrical surveys for corrosion are
impractical, a leakage survey must be conducted at least once every 3 calendar
years at intervals not exceeding 39 months.
Source: Electronic Code of Federal Regulations
39
GPRTC Standards
Grade 1 Leak represents an existing or probable hazard to persons or property, and
requires immediate repair or continuous action until the conditions are no longer
hazardous.
1.
Any leak which, in the judgment of operating personnel at the scene, is
regarded as an immediate hazard.
2.
Escaping gas that has ignited.
3.
Any indication of gas which has migrated into or under a building, or into a
tunnel.
4.
Any reading at the outside wall of a building, or where gas would likely
migrate to an out-side wall of a building.
5.
Any reading of 80% LEL, or greater, in a confined space.
6.
Any reading of 80% LEL, or greater in small substructures (other than gas
associated sub structures) from which gas would likely migrate to the outside
wall of a building.
7.
Any leak that can be seen, heard, or felt, and which is in a location that may
endanger the general public or property.
Source: Gas Piping Technology Committee: ANSI ASC Z380
40
GPRTC Standards
Grade 2 Leak is recognized as being non-hazardous at the time of detection, but
justifies scheduled repair based on probable future hazard.
A.
Leaks Requiring Action Ahead of Ground Freezing or Other Adverse Changes
in Venting Conditions. Any leak which, under frozen or other adverse soil
conditions, would likely migrate to the outside wall of a building.
B.
Leaks Requiring Action Within Six Months
1.
Any reading of 40% LEL, or greater, under a sidewalk in a wall-to-wall paved area that
does not qualify as a Grade 1 leak.
2.
Any reading of 100% LEL, or greater, under a street in a wall-to-wall paved area that has
significant gas migration and does not qualify as a Grade 1 leak.
3.
Any reading less than 80% LEL in small substructures (other than gas associated substructures)
from which gas would likely migrate creating a probable future hazard.
4.
Any reading between 20% LEL and 80% LEL in a con-fined space.
5.
Any reading on a pipeline operating at 30 percent SMYS, or greater, in a class 3 or 4
location, which does not qualify as a Grade 1 leak.
6.
Any reading of 80% LEL, or greater, in gas associated sub-structures.
7.
Any leak which, in the judgment of operating personnel at the scene, is of sufficient magnitude
to justify scheduled repair.
Source: Gas Piping Technology Committee: ANSI ASC Z380
41
GPRTC Standards
Grade 3 Leak is non-hazardous at the time of detection and can be reasonably
expected to remain non-hazardous.
1.
Any reading of less than 80% LEL in small gas associated substructures.
2.
Any reading under a street in areas without wall-to-wall paving where it is
unlikely the gas could migrate to the out-side wall of a building.
3.
Any reading of less than 20% LEL in a confined space.
Source: Gas Piping Technology Committee: ANSI ASC Z380
42
43
For more information please contact:
Ken Yagelski
Manager Midstream Services
UGI Energy Services
202.713.9003
[email protected]
44

similar documents