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Glacial Energy Introduction to Natural Gas. Agenda Gas Overview Glacial Gas Logistics Customer Data Pricing Billing Enrollments

Mar 31, 2015

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Glacial Energy Introduction to Natural Gas Slide 2 Agenda Gas Overview Glacial Gas Logistics Customer Data Pricing Billing Enrollments Slide 3 Formation of Natural Gas Natural Gas is formed by the compression and heating of organic materials over centuries. Natural Gas and many other Fossil Fuels can be found in methane clathrates, coal beds, marshes, bogs, and landfills. Slide 4 Natural Gas Vs. Electricity Electricity Electricity is not easily stored and requires balance between consumption and generation This role is generally fulfilled by an Independent System Operator (ISO). Electricity usage tends to spike in the summer (Along with prices). Grid Operators (ISOs) incentivize off peak usage by raising prices on peak usage within a day. In order to maintain balance (Generation and Consumption) and not overload grid systems, most LDCs will set prices that make peak hour usage expensive. Electricity customers may be pooled by the LDC into service classes that charge based on time of use (TOU). Natural Gas Natural Gas markets do not require an ISO. Natural Gas can be stored in underground facilities. Natural Gas delivery and consumption may vary and can be reconciled within an imbalances market. Natural Gas usage tends to spike in the winter (Along with prices). Natural Gas Does not have peak hours within a day. Natural Gas is measured by : CCF/MCF- a volumetric measurement of Natural Gas. Therm/DTH- a measurement of the heating value of gas Slide 5 Natural Gas Measurements Centum (100) Cubic Feet/ Mil (1000) Cubic Feet (CCF/MCF)- a measurement of space or volume of natural gas. A CCF represents the amount of gas contained in a space equal to one hundred cubic feet (1000 cubic ft= MCF). Therm/Dekatherm (Therm/DTH)- a measurement of energy content of an amount of natural gas (1 Therm = 100 000 BTU.) British Thermal Unit (BTU)- amount of energy needed to raise the temperature of one pound of water one degree Fahrenheit. Therm Conversion Factor- converts the volume of gas (CCF/MCF) to the amount of energy (Therm/DTH). 1 CCF is approximately equal to 1 Therm. This factor will change monthly to reflect actual energy content of gas delivered that month. 1 CCF=1 Therm=30 Kwh=103,200 BTU 1 CCFx10=1 MCF 1 Thermx10=1 DTH Volumetric Measurements CCF100 Cubic Ft MCF1000 Cubic Ft MMCFMillion Cubic Ft BCFBillion Cubic Ft TCFTrillion Cubic Ft Slide 6 Producing Natural Gas Natural Gas is hard to find as it can be trapped in porous rocks deep underground Once natural gas comes out of the ground, it goes to a processing plant where it is cleaned of impurities. Natural Gas may come from several sources such as, coalbeds and landfills, which comprise approx 5 percent of the total gas supply. Today natural gas is produced in 32 states, though just 3 states, Oklahoma, Texas and Louisiana produce more than 61 percent of the countrys natural gas Slide 7 Components of Natural Gas Like electricity, natural gas has three distinct components: the commodity SUPPLY portion; the long- distance TRANSPORTATION portion; and the local DISTRIBUTION portion. SUPPLY is the actual commodity itself and is the only component that is deregulated. Consumers in many states have the choice of who supplies their natural gas. TRANSPORTATION is the movement of the gas from the Production area/well-head to the market area (city gate). This occurs using large pipelines. DISTRIBUTION is where gas is moved from the city gate or utility, to the customer, aka the burner tip. This step is done using small pipelines. Transportation and distribution of natural gas is not open to choice and the price for those services continues to be set by state and federally approved tariffs. Slide 8 Transporting and Storing Natural Gas How does gas get to the consumer? More than 1 million miles of underground pipelines link natural gas fields to major cities across the US. Compressor stations, which are spaced 50 to 100 miles apart, move the gas along the pipeline at about 15 MPH. Some gas is temporarily stored in huge underground reservoirs. The underground reservoirs are typically filled in the summer so there will be enough natural gas during the winter heating season. Eventually gas reaches the city gate of a local utility, aka LDC. The pressure is reduced and an odorant is added so leaking gas can be detected. The LDC uses smaller pipes to carry gas to the consumers. Slide 9 Pipeline System Slide 10 Natural Gas Process Slide 11 Natural Gas Uses About 24% of energy used in the United States came from natural gas in 2008. The United States used 23.8 trillion cubic feet (Tcf) of natural gas, matching the record high set in 2000. Natural gas is used to produce steel, glass, paper, clothing, brick, electricity and as an essential raw material for many common products. Some products that use natural gas as a raw material are: paints, fertilizer, plastics, antifreeze, dyes, photographic film, medicines, and explosives. The major consumers of natural gas in the United States in 2008 included: 1.Industrial sector 7.9 Tcf (Trillion cubic feet) 2.Electric power sector 6.7 Tcf 3.Residential sector 4.9 Tcf 4.Commercial sector 3.1 Tcf Slide 12 How does Glacial get Gas to its Customers Gas moves from the production area to the burner tip (customer). There are several ways that Glacial will be buying gas; in production area, or the well-head or various points along the pipe, or in the market area. All gas (east of the Mississippi) is based on a Henry Hub, La. price. The difference in price from the Henry Hub to any point where we buy gas is called basis. Basis can be defined as the difference in cost of transporting gas from the Henry Hub to the location where the gas is purchased. Slide 13 Who does Glacial Purchase Gas From? Gas can be purchased from a number of sources: Producers Involved in exploration and production Regional player Typically do not have transportation assets Devon, Anadarko, Cabot Regional Suppliers Smaller player, may or may not have own production Typically strong at a few purchase points in a given region Texla, eServices, Sprague Full-Service Suppliers, aka Integrated Producers Production capabilities Storage and Transportation Assets Typically trade at all liquid points in the US BP, Shell, Conoco Phillips, Sempra Slide 14 Assets Pipeline Capacity and Storage Space are assets that marketers such as Glacial try to attain to give them a competitive advantage. Having Pipeline Capacity allows us to evaluate the basis spreads on a given day /month to try to optimize our purchases. Injections are made into storage during the summer season so that there is enough gas for the winter season. Typically, but not always, gas can be injected into storage at less than winter prices. Not all LDCs release pipeline capacity or storage space. Pipeline capacity can also be bid on during an open season directly from the pipeline company. Similarly, Storage space can be purchased directly from storage field operators. In lieu of having assets, gas is bought at the city gate (highest price gas). Slide 15 Customer Data: Acquisition and Flow -Data is typically acquired through an intermediary referred to as an Electronic Data Interface Provider (EDIP). -The data flow process is initiated by a sales person (BDM) who receives permission to provide a price comparison for a potential customer. -Glacial Energy requests Historical Usage Data (HUD) from an EDI Provider. -If a customer decides to chose Glacial Energy as an Alternative Gas Supplier (AGS), Glacial will then use an EDI Provider to facilitate with Enrollment, Meter Readings, as well as potential customer Drops if necessary. Slide 16 Glacial Customer Pricing Once the appropriate customer data has been gathered, the Pricing Team begins a customer analysis. Glacial Energy offers our customers index based products. Indexed Product: Variable Price shall reflect each month the wholesale cost of natural gas. This cost includes commodity (NYMEX last day settle), transportation (basis), storage, balancing, operational expenses, profit, all applicable taxes and fees, and any other market price factors. Glacial Energy Pricing Model Model generates average price and savings estimates for a particular customer based on: Utility Prices, the Glacial Index, and Specific Customer Information (such as: Load Profile, Service Classification, etc). Slide 17 Glacial Customer Pricing Glacial Energy Pricing Model -Pricing models are used to create a Pricing Analysis for individual customers. -Pricing Analyses include: -Customer Name and Address -Customer Profile (HUD) -Average Rates for both the Utility and Glacial Energy -Average amount of savings that this customer can expect by switching to Glacial Energy. * Please See Sample Analysis for Illustration (Next Slide). Slide 18 Customer Name, Address and Account Info- Show the customization of the proposal and customers current utility and rate class. Glacial and Utility Average Price- show average rates and total charge estimates for a particular customer over a given period. Savings Analysis- Shows Customer Savings With Glacial Energy. HUD Summary- show total usage and the analysis term period. Average Price trending for both Glacial and Competitor. Customers annual usage profile. Slide 19 Glacial Customer Pricing Glacial Energy Pricing Flow 1)BDM acquires LOA and Utility Bills from customer. 2)BDM submits PRF, LOA*, and Bills. 3)CADs team inputs the potential customer into CRM and waits for HUD. 4)Pricing team gathers customer info and prices. 5)Pricing Team sends completed analysis back to the BDM. Slide 20 Enrollments Requesting Historical Usage Data (HUD) Account # or Customer # EDI or Manual: Michigan, Texas, and Maine are manual. Deadline to enroll Listed in LDC tariff or call pipeline representative Varies by rate class and meter reads Method of Enrollment EDI Meter Read Dates Slide 21 Billing Citygate (CG) to Bu