Fuel Supply Planning & Contracting

LNG Peaking Feasibility Study

The City of Winfield, Kansas (City) operates municipal electric and gas systems. ERG was retained by the City to perform a study analyzing the technical, economic and financial feasibility of developing a liquified natural gas (LNG) peaking facility to provide a lower cost alternative to the City’s historical reliance upon pipeline supplies of peaking gas. In this regard, members of ERG investigated the regional availability, pricing and transportation of LNG supply, siting issues, and identified several alternative facility locations based upon land use compatibility criteria, system interconnection requirements driven by system gas flow patterns, environmental considerations, permitting requirements, economic/financial considerations, and public safety criteria. A detailed proforma financial analysis of the project was performed. Study results indicated that on a financial/economic basis the City’s continued reliance upon pipeline peaking gas supply would be preferable to development of an LNG facility owing to an estimated long-term payback driven by current steel prices, equipment fabrication costs and construction costs.

Review of Natural Gas Storage Practices

ERG staff were retained by a regulatory body to review the costs and benefits associated with proposed modifications to a gas distribution utility’s natural gas storage program and associated confidential supply arrangements. The storage program as proposed, acted as both a physical hedge on commodity costs and a means by which the utility could reduce the size of its demand contracts and consequently the fixed costs to the ratepayers. ERG staff found the proposal beneficial with respect to anticipated costs and consistent with the intent of previous regulatory body actions.

Review of Proposed Nuclear Fuel Agreements

For the Southern California Public Power Agency (SCPPA), a member of the Firm was responsible for reviewing proposed nuclear fuel agreements with Homestake Mining Company concerning Southern California Edison Company’s (SCE), San Onofre Nuclear Project of which SCPPA owns a sizable share. A member of the Firm participated in proceedings before the California Public Utilities Commission and FERC concerning the reasonableness of SCE’s proposed allocated nuclear fuels charges.

Analysis of Peaking Alternatives Study

The Greenville Utilities Commission (GUC) owns and operates a municipal gas distribution system in North Carolina. Historically, GUC has purchased its full requirements from the North Carolina Natural Gas, Co. (NCNG). Over the past few years, GUC has experienced significant growth in its peak day demand, thus exceeding the Maximum Daily Quantity (MDQ) of its firm supply agreement with NCNG. A study was performed by members of the Firm to project GUC’s future gas demand and to identify and analyze potential alternatives for meeting GUC’s peak demands in future years. The study concluded that the installation of a propane-air peaking facility would only be of limited near term value to meeting GUC’s peaking capacity requirements, and though continued utilization of firm contractual supply could be used to meet the utility’s long term peaking requirements, this option was found to be inefficient owing to the fact that GUC exhibits a very low annual load factor. Development of either a satellite or liquefaction LNG peaking facility was found to be the best alternative to meeting GUC’s long term peak capacity requirements.

Large Scale LNG Peaking Facility Development

Members of ERG provided assistance to the Greenville Utilities Commission (GUC) regarding the performance of initial investigations concerning the development of a large scale LNG liquefaction facility, potentially sized to meet the long-term gas peaking requirements of North Carolina and the southeast region. Assistance was also provided in negotiating a preliminary project development agreement between GUC and Pan Energy, one of the largest gas companies in the U.S. Ongoing investigations are being performed to determine the level of market support for the project and to determine ultimate project sizing. Project development, partnering, operating and financing structures are also being investigated in support of economic/financial analyses of the proposed project.

Evaluation and Examination of City Gate Metering Error

As a result of a metering error, Entergy New Orleans, Inc. (ENO) was charged for more natural gas than it received for a twenty-three month period of by Gulf South Pipeline totaling $1,408,564, resulting in a billing adjustment. Members of the Firm performed an examination and evaluation of the adjustment amount and determined that ENO underestimated the value of the credit due to ENO and, ultimately, its New Orleans retail ratepayers. The Firm determined that the undervaluation of the credit to be approximately $728,820 and reported its findings to the Council of the City if New Orleans (ENO's retail regulator) which led to a Resolution of the Council (R-08-450) directing ENO to show cause why it should not be ordered to credit ENO’s Purchase Gas Adjustment (over/under account) of $728,820.

Acquisition of Portable LNG Peaking Facility

Members of the Firm provided ongoing consulting services to the Greenville Utilities Commission (GUC) in support of GUC acquiring on-site gas peaking capability prior to the winter heating season. Consulting services included comparative analysis of propane-air and Liquid Natural Gas (LNG) vaporization units, assistance in locating suitable portable propane-air and LNG peaking units, assistance in obtaining a waiver from the U.S. Department of Transportation necessary to install a portable LNG vaporizer, assistance in locating suitable supplies of LNG liquid feedstock, assistance in arranging transportation of LNG liquid, identification of a suitable site for installation of the peaking facility, and site development assistance. In conjunction with this engagement, analyses were undertaken to determine suitable project sizing based upon GUC’s load profile. Economic/financial analyses comparing the annual costs associated with installation of a portable LNG peaking facility in comparison to continued reliance of NCNG firm supply were accomplished. Assistance was also provided to GUC regarding the installation and construction of the project.

Firm Gas Supply Agreement Modifications

Greenville UtilitiesMembers of ERG provided assistance to The Greenville Utilities Commission (GUC) in support of negotiating modifications to its existing supply agreement with the North Carolina Natural Gas, Co. (NCNG) necessary to allow the installation of an LNG peaking facility. Proposed terms and conditions were analyzed in order to determine the costs, benefits and potential negative implications to GUC ratepayers, as well as those related to GUC’s future supply flexibility. Negotiations with NCNG were not successful and resulted in a decision by GUC to not enter into a modified firm supply agreement. As an alternative course of action, GUC elected to develop a portable LNG vaporizer system to meet its near term peak capacity requirements while affording it time to consider other long term peak capacity supply options.

Long-Term Regional Gas System Master Plan

Members of the Firm assisted the City of Las Cruces, New Mexico and the Rio Grande Natural Gas Association in the development of a long-term regional gas system master plan. Key elements of this assignment included, the identification, for strategic decision-making purposes, of key options and policy issues associated with future operations of each system as currently structured and operated or as would exist should the two systems be merged; the development of a System Flow Network Model with the capability to simulate the high pressure gas distribution systems; the development of population/customer profiles; the identification of applicable national, state, and local regulations and codes that impacted system design and the costs of capital improvements; and, the development of capital improvement programs for both systems on both a stand-alone and merged basis.

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