Utility Analysis



Baseline Natural Gas Analysis

Natural Gas Industry

Before the 1980’s, most U.S. customers purchased natural gas from local utilities who owned and maintained the local gas distribution network. Because of the monopoly position of gas suppliers within their service territory, the natural gas market was regulated to ensure a fair price to both suppliers and customers. Beginning in the 1980’s, the natural gas market in most parts of the U.S. was deregulated. As part of deregulation, natural gas utilities were forced to separate the bulk purchase and distribution parts of their businesses. Today, customers can purchase wholesale natural gas from their company of choice in a competitive market, and then pay the local utility for local transportation costs to the facility.

In the U.S., natural gas costs and price volatility have increased sharply in recent years. From 2000 to 2008, the real cost of natural gas to the industrial sector rose at a rate of 7.4% per year and the nominal cost of natural gas to the industrial sector rose at a rate of 10.1% per year. At these rates, real costs are doubling about every 10 years and nominal costs are doubling about every 7 years.

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Source: U.S. Dept. of Energy, Annual Energy Review 2008, Report No. DOE/EIA-0384(2008)

Natural Gas Billing Data

Small natural gas users typically purchase natural gas from a local utility, and the total cost implicitly includes the cost of the natural gas plus the cost of transporting the gas from the city-gate to the facility. Like electricity, the cost of the gas may depend on the quantity purchased. For example, the following natural gas rate structure has energy use blocks in which the cost of natural gas declines as the quantity of gas purchased increases. .

General Service Gas Rate

Service: $5.40 /month

Commodity: $0.15371 /ccf for first 1,000 ccf

$0.12719 /ccf for next 14,000 ccf

$0.10722 /ccf for all ccf over 15,000 ccf

Large gas consumers frequently buy natural gas directly from wholesale gas suppliers rather than the local utility. In this case, the customer usually pays the wholesale supplier for the gas and then pays the local utility for transporting the gas from the city-gate to the facility. For example, the following table shows billing data for a customer that purchases gas from a wholesale supplier. The wholesale amounts are previously negotiated "blocks" of gas and do not represent actual consumption. The unit cost of wholesale gas typically declines in the summer. Actual consumption is usually read by the utility meter. The unit cost for transportation increases in the summer because transportation charges are often based on a "block" structure in which the first "block" of gas has the highest unit cost.

| | |Wholesale Gas | | |Transportation | | |

|Date |Block Amount |Cost ($) |$/MMBtu |Measured |Cost ($) |$/MCF |Total Cost |

| |(MMBtu) | | |Consumption (MCF) | | |($) |

|Feb-96 |12,215 |49,178 |4.03 |8,185 |3,524 |0.43 |52,702 |

|Mar-96 |6,000 |30,144 |5.02 |9,042 |3,857 |0.43 |34,001 |

|Apr-96 |9,000 |32,427 |3.60 |5,590 |2,522 |0.45 |34,949 |

|May-96 |5,000 |14,785 |2.96 |5,001 |2,295 |0.46 |17,080 |

|Jun-96 |5,000 |15,365 |3.07 |4,104 |1,948 |0.47 |17,313 |

|Jul-96 |3,200 |10,669 |3.33 |4,260 |2,008 |0.47 |12,677 |

|Aug-96 |3,500 |10,357 |2.96 |4,706 |2,181 |0.46 |12,538 |

|Sep-96 |6,000 |14,562 |2.43 |5,385 |2,444 |0.45 |17,006 |

|Oct-96 |6,000 |14,886 |2.48 |5,637 |2,541 |0.45 |17,427 |

|Nov-96 |6,800 |23,650 |3.48 |8,073 |3,483 |0.43 |27,133 |

|Dec-96 |10,701 |42,928 |4.01 |9,367 |3,983 |0.43 |46,911 |

|Jan-97 |10,000 |39,915 |3.99 |10,606 |4,278 |0.40 |44,193 |

|Total |83,416 |298,866 |3.58 |79,956 |35,064 |0.44 |333,930 |

Quick Natural Gas Breakdown

A patterned increase in natural gas use during the winter months is often associated with space heating. The approximate quantities of space heating and production related natural gas use can be quickly estimated by drawing a line through average summer energy use. For example, in the figure below, summer natural gas use is about 310 Mcf/day. Natural gas use below the line is associated with production and natural gas use above the line is associated with space heating. The annual average natural gas use is about 430 Mcf/day. Thus, the fractions of gas use for production and space heating are about:

Fraction for production = 310 / 430 = 72% Fraction for space heating = 28%

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Disaggregating natural gas use into production and space conditioning components can quickly identify the magnitude of possible savings opportunities in each area and improve the accuracy of disaggregating energy use by equipment and end use.

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