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Title: Natural gas contracts in an emerging competitive market

Abstract

Natural gas is being viewed by many as the fuel of the 1990s and beyond because of its environmental qualities, relatively low cost and significant domestic resource base. However, in the Fall of 1991, a group of electric utility executives met with then Deputy Secretary of Energy Henson Moore and asserted that an inability to obtain long term gas contracts meant that supplies are unreliable and construction of gas-fueled generating stations is being discouraged. This study was requested by the Deputy Secretary to address the issues surrounding long-term gas contracts and supply reliability. The relationship between supply reliability and contracts is explained in terms of the number of buyers and sellers in a market. With the appropriate state regulatory policies, utilities can contract for gas and obtain reliable supplies at competitive market prices. Public utility commissioners are encouraged to permit utilities a free choice in signing gas contracts, but to allow only competitive market prices to be reflected in allowable fuel costs.

Authors:
Publication Date:
Research Org.:
Argonne National Lab., IL (United States)
Sponsoring Org.:
USDOE, Washington, DC (United States)
OSTI Identifier:
10107643
Report Number(s):
ANL/EAIS/CP-77643; CONF-9210219-1
ON: DE93002923
DOE Contract Number:
W-31109-ENG-38
Resource Type:
Conference
Resource Relation:
Conference: 14. annual North American conference of the International Association for Energy Economics,New Orleans, LA (United States),26-28 Oct 1992; Other Information: PBD: [1992]
Country of Publication:
United States
Language:
English
Subject:
03 NATURAL GAS; NATURAL GAS INDUSTRY; CONTRACTS; NATURAL GAS; MARKET; ELECTRIC UTILITIES; REGULATIONS; PRICES; AVAILABILITY; SPOT MARKET; US FERC; 030600; ECONOMIC, INDUSTRIAL, AND BUSINESS ASPECTS

Citation Formats

Sutherland, R.J. Natural gas contracts in an emerging competitive market. United States: N. p., 1992. Web.
Sutherland, R.J. Natural gas contracts in an emerging competitive market. United States.
Sutherland, R.J. 1992. "Natural gas contracts in an emerging competitive market". United States. doi:. https://www.osti.gov/servlets/purl/10107643.
@article{osti_10107643,
title = {Natural gas contracts in an emerging competitive market},
author = {Sutherland, R.J.},
abstractNote = {Natural gas is being viewed by many as the fuel of the 1990s and beyond because of its environmental qualities, relatively low cost and significant domestic resource base. However, in the Fall of 1991, a group of electric utility executives met with then Deputy Secretary of Energy Henson Moore and asserted that an inability to obtain long term gas contracts meant that supplies are unreliable and construction of gas-fueled generating stations is being discouraged. This study was requested by the Deputy Secretary to address the issues surrounding long-term gas contracts and supply reliability. The relationship between supply reliability and contracts is explained in terms of the number of buyers and sellers in a market. With the appropriate state regulatory policies, utilities can contract for gas and obtain reliable supplies at competitive market prices. Public utility commissioners are encouraged to permit utilities a free choice in signing gas contracts, but to allow only competitive market prices to be reflected in allowable fuel costs.},
doi = {},
journal = {},
number = ,
volume = ,
place = {United States},
year = 1992,
month =
}

Conference:
Other availability
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  • Natural gas is being viewed by many as the fuel of the 1990s and beyond because of its environmental qualities, relatively low cost and significant domestic resource base. However, in the Fall of 1991, a group of electric utility executives met with then Deputy Secretary of Energy Henson Moore and asserted that an inability to obtain long term gas contracts meant that supplies are unreliable and construction of gas-fueled generating stations is being discouraged. This study was requested by the Deputy Secretary to address the issues surrounding long-term gas contracts and supply reliability. The relationship between supply reliability and contractsmore » is explained in terms of the number of buyers and sellers in a market. With the appropriate state regulatory policies, utilities can contract for gas and obtain reliable supplies at competitive market prices. Public utility commissioners are encouraged to permit utilities a free choice in signing gas contracts, but to allow only competitive market prices to be reflected in allowable fuel costs.« less
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  • The authors describe a three dimensional frontier consisting of: spending, availability/reliability, and utilization/heat rate. To determine optimal behavior in a future deregulated market, one must also find the optimal adjustment path from present to long-run frontier operation, and the optimal strategic action/response as determined by game theory. One can also perform more limited optimizations along either the two dimensional spending/reliability or spending/utilization frontiers. Although the authors mainly discuss optimizing existing domestic plants, frontier analysis could easily be applied to an electric producer's plants or acquisition targets internationally. Efficient operation saves money even in countries where electric markets are still regulatedmore » and can also confer indirect environmental benefits. AER is also applying these frontier analysis and game theory techniques to environmental decision-making, specifically to environmental retrofit decisions.« less
  • Pricing provisions and take-or-pay provisions in natural gas producer/purchaser contracts are analyzed, along with the potential impact of contract provisions on natural gas prices in the event of wellhead price deregulation. Among the topics addressed are the current structure of pricing provisions in natural gas contracts and how these provisions differ by Natural Gas Policy Act Section, contract vintage, and market; and the potential for marked price increases when deregulation occurs. Three appendixes discuss the methodology used, the data collection operations, and compare this study with the results of other similar studies. This report is Part II (out of IV)more » of an analysis of the Natural Gas Polich Act and several alternatives. 2 figures, 23 tables.« less