Btu insurance: Winning the dual-fuel war

Journal Article · Tue Nov 30 23:00:00 EST 1993 · Fortnightly; (United States)

OSTI ID:7115644

White, M G ^[1]

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1. CATEX Energy, Inc., Boston, MA (United States)

Among local gas distribution companies (LDCs), the general feeling is that futures are a no-win proposition whose potential risks outweigh the potential rewards. Nevertheless, LDC participation in hedging with natural gas futures can be justified. The Federal Energy Regulatory Commission's Order 636 requires LDCs to make firms transportation decisions and incur the related costs. Consequently, and LDC's ability to better estimate its throughput and firm transportation needs will be critical to its profitability and, ultimately, the rates it charges customers. Unfortunately, estimating firm transport needs is a gamble. LDCs need a type of futures contract to trade capacity so they can guarantee a price for their incremental firm space, or a package that combines space with supply so they can guarantee a market as well as revenue for the space. Btu insurance can be a tool in developing just such a [open quotes]package[close quotes] by assuring the competitiveness of natural gas with alternative fuels, which in turn will ensure that their firm transport is used and their throughput will be high.

• OSTI ID: 7115644
• Journal Information: Fortnightly; (United States), Journal Name: Fortnightly; (United States) Vol. 131:22; ISSN FRTNE8
• Country of Publication: United States
• Language: English

Related Subjects

03 NATURAL GAS
030600* -- Natural Gas-- Economic
Industrial
& Business Aspects
CAPITALIZED COST
COST
ENERGY SOURCES
ENERGY SYSTEMS
FLUIDS
FOSSIL FUELS
FUEL GAS
FUEL SUBSTITUTION
FUELS
GAS FUELS
GASES
LOSSES
MINIMIZATION
NATURAL GAS
NATURAL GAS DISTRIBUTION SYSTEMS
PRICING REGULATIONS
REGULATIONS