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Oregon Public Utility Commission 2008 Natural Gas Outlook Meeting

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Rate increases due to increase in natural gas price ... Summary - Natural Gas Price for the ... Lower LNG imports US gas prices aren't the only ones rising. ... – PowerPoint PPT presentation

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Title: Oregon Public Utility Commission 2008 Natural Gas Outlook Meeting


1
Oregon Public Utility Commission 2008 Natural Gas
Outlook Meeting
  • July 15, 2008
  • 130 PM
  • Main Hearing Room

2
  • Natural Gas Price Increase for 2008-2009
  • Price Increase impacts on Customer Bills
  • Measures and Actions for Assisting Customers Cope
    with the Rate Increase Due to the Increase in
    Natural Gas Price

3
Agenda
  • Overview of expected natural gas price increase
    Oregon Public Utility Commission Staff
  • Energy efficiency and conservation to help cope
    with the price increase Energy Trust of Oregon
  • The larger context for the gas price increase
    Northwest Gas Association
  • Utility presentations Avista, Cascade, and
  • NW Natural
  • Rate increases due to increase in natural gas
    price
  • Utility programs to help customers cope with gas
    price increase

4
Overview
5
Summary - Natural Gas Price for the Pacific
Northwest 2008-2009
This is about a 70 increase in actual spot
natural gas price from the Winter of 2007-2008.
6
Summary - Natural Gas Price for the Pacific
Northwest 2008-2009 (2)
7
Snapshot Longer Term Natural Gas Price Trends
8
Temperature August October 2008
9
Precipitation August October 2008
10
Temperature Nov. 2008 Jan. 2009
11
Precipitation Nov. 2008 Jan. 2009
12
Temperature Feb. 2009 Apr. 2009
13
Precipitation Feb. 2009 Apr. 2009
14
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15
These projections for shut-in production during
the 2008 hurricane season are derived using Monte
Carlo simulation techniques. Based on
information from the latest NOAA seasonal
hurricane outlook and an analysis of the
production impact from past tropical storms and
hurricanes, EIA simulated the sampling
distributions for seasonal shut-in of crude oil
and natural gas production. The outage levels
estimated are for the entire season for each
level of storm activity. In this simulation
Tropical Storms and Moderate Hurricanes reduce
GOM production by less than 1, while an Intense
Hurricane would reduce production by about 2.
Katrina/Rita was an extreme storm event for GOM
production, reducing it by about 17.
Table 1. Estimated Shut-in Production by Type of
Weather System, 1995-2007
16
Based on the Monte Carlo simulations described
above, reported in Table 1, Table 2 presents the
cumulative results for shut-in of production for
the entire 2008 Hurricane Season. The mean level
for cumulative GOM natural gas production shut-in
for 2008 is about 3.6 of production. At the 95
percentile (extreme level) production shut-in is
about 11. As noted in the table the probability
of the mean level of shut-in is about 34 while
the probability of the extreme level is about
16. Another event like Katrina/Rita is highly
unlikely, with a probability of less than 1.
Table 2.  Simulated Cumulative Shut-in Production
for 2008 Hurricane Season
17
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18
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19
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20
Energy efficiency and conservation to help cope
with the price increase Energy Trust of Oregon
21
2008/2009 Fall-Winter Campaign
22
Energy Trust of Oregon
  • Created through 1999 Oregon legislation
    establishing a 3 public purpose charge for PGE
    and Pacific Power
  • Invest in cost effective energy efficiency
  • Pay above-market costs of renewable energy
  • Serve all sectors (residential, commercial and
    industrial)
  • Services to residential and commercial natural
    gas customers began in 2003 with NW Natural and
    with Cascade and Avista shortly thereafter

23
Natural Gas Savings Results to Date
  • Activity and results trend upward every year
  • In 2007, saved nearly 2.3 million therms of
    natural gas
  • Completed nearly 12,000 projects
  • Saved enough natural gas to heat 4,400 homes
  • Since 2003, cumulatively saved 6.7 million annual
    therms
  • Enough natural gas to heat 13,000 homes
  • Equal to 32 of our goal to save 21 million
    annual therms by 2012
  • Anticipate 2008 year-end savings will exceed this
    years goals by over 20

24
Campaign Objectives
  • Broad fall/winter 08-09 campaign
  • Engage all utility partners
  • Strong emphasis on customer opportunities to save
  • Umbrella campaign with compelling messages to
    all utility customers
  • Rate increases are happening
  • Choices can be made to help manage energy costs
  • Major call to action
  • Drill down to specific actions and corresponding
    benefits

25
Proposed Campaign Themes
  • Awareness and motivation - !
  • Dynamic appeal to all customer types
  • Identify low cost/no cost steps with greatest
    impact
  • Spotlight specific actions for customers to take
  • Promote special incentives and limited time
    offers to spur actions
  • Link customers to Energy Trust and utility
    assistance

26
Comprehensive Campaign Elements
  • Reinforce common messages in the marketplace
  • Introduce special increased incentive bonuses
  • Emphasize greatest savings opportunities and
    solutions
  • Combine radio, print, web, direct mail and retail
    pieces
  • Leverage direct utility customer communications
  • Reinforce utility Energy Trust call center
    messages
  • Provide joint utility/Energy Trust outreach to
    trade allies and home energy reviewers
  • Include corresponding public relations efforts

27
The larger context for the gas price increase
Northwest Gas Association
28
5335 SW Meadows Rd., 220 Lake Oswego, OR
97035 (503) 624-2160 www.nwga.org NWGA
Members Avista Corporation Cascade Natural Gas
Co. Intermountain Gas Co. NW Natural Puget Sound
Energy Duke Energy Gas Transmission Terasen
Gas TransCanadas GTN System Williams NW Pipeline
29
Rockies Supplies Growing
29
30
Production WSCB Relatively Flat
31
BC Production Growing
32
Supplies Moving to Other Markets
32
33
07 Outlook Base Demand by Sector
1.9
2.3
3.3
34
Changes in Generation Capability
(Adds/Retirements)
April, 2008
34
35
NW Generation by Fuel (Source NPCC Generating
Projects, April 08)
35
36
Sumas Flow Pipelines Full
37
WCSB View From the South
38
Supply Projects Proposed to Serve the Northwest
  • LNG Import Terminals
  • Bradwood Landing LNG
  • Jordan Cove LNG
  • Kitimat LNG
  • Oregon LNG
  • WestPac LNG Terminal
  • Pipelines
  • Pacific Connector Pipeline
  • Palomar Pipeline East, West
  • Sunstone Pipeline
  • Blue Bridge Pipeline
  • Oregon LNG
  • Ruby Pipeline

38
39
Utility presentations Avista, Cascade, and NW
Natural
40
Rate increases due to increase in natural gas
price Utility programs to help customers cope
with gas price increase
41
OPUC 2008 Natural Gas Outlook
  • Avista Corporation
  • Kevin Christie
  • July 15, 2008

42
Year over Year Price Comparison
43
(No Transcript)
44
Market Summary
  • In the short-term high prices are likely to
    remain high due to
  • US and Canadian storage balances lower and not
    likely to fully rebound
  • Oil and Coal prices at record highs with no end
    in sight
  • Lower LNG imports US gas prices arent the only
    ones rising. Strong European and Asian prices
    are luring LNG away from the US
  • Lower imports from Canada royalty issues and
    interprovincial growth preventing higher exports
  • REX pipeline Rockies gas is moving east to
    higher priced markets
  • Purchasing/hedging activity more players are
    hedging now
  • Rising industrial demand demand is growing
  • Weather warmer than normal summer will put the
    heat on gas fired generation
  • Hurricane risk every tropical storm causes
    panic in the market
  • On the plus side, the slowing US economy and
    robust production growth could help put downward
    pressure on prices.
  • The outlook for prices is that they will likely
    remain high for the remainder of the year and
    into 2009.

45
The Fundamentals
LNG Imports
US Storage Balances
Canadian Imports
46
Total System Average Daily Demand vs.
ResourcesNov 08 Oct 09
47
Procurement Plan Results to Date
  • Executed 60 of planned hedges.
  • Weighted average annual cost of hedges executed
    is 10.39.
  • Storage
  • OR JP Leased 56 full with a cost of 9.40
  • OR JP Owned 67 full with a cost of 9.24
  • OR Mist 47 full with a cost of 9.30
  • Annual commodity WACOG currently in rates
  • OR - 7.64

48
Customer Information Bill Payment Assistance
  • Avista is committed to increasing customer and
    community awareness about rising prices and wise
    energy use
  • Current outreach campaign to educate and inform
    customers about higher gas prices
  • Every little bit campaign is focused on
    low-cost and no-cost measures, with information
    on rebates and energy efficiency
  • Recent expansion of DSM programs
  • LIRAP and LIHEAP
  • Payment arrangements, CARES and Project Share
  • Internal policy of no winter shut-offs when temps
    fall below freezing

49
OPUC 2008 Gas Supply and Pricing Outlook
  • Cascade Natural Gas Corporation
  • Mark Sellers-Vaughn
  • July, 2008

50
Cascade Natural Gas Corp. GAS SUPPLY AND
PRICING OUTLOOK 2008-2009
  • MEETING CUSTOMERS NEEDS -
  • Ensure All Core Customers Natural Gas Needs are
    Met -
  • Through Disciplined Market Analysis, Long-term
    Contracts, and Prudent Storage Management
  • Actively Promote Customer Conservation
  • Mitigate Price Volatility for Customers -
  • Through Multi-Year Hedging and a Diversified
    Portfolio
  • EMPLOYING EFFECTIVE SUPPLY-SIDE STRATEGIES -
  • Maintain a Rolling Five-Year Physical Supply
    Portfolio
  • With Firm, Diversified Supply Contracts
  • Prices are Hedged with Multi-Year Financial Swaps
    for up to 3 years
  • Utilize Market Area Storage Jackson Prairie
    and Plymouth LNG
  • Effectively Manage Wholesale Prices -
  • Through Cost-Effective Spot Purchases
  • By Participating in USA and Canadian Pipeline
    Rate Filings
  • By Optimizing Pipeline Capacity and Other Core
    Resources Through Available Release Mechanisms

51
Natural Gas Price Factors
  • There appears to be some limited level of linkage
    between oil and natural gasnatural gas currently
    costs less per heating unit, but oil and natural
    gas tend to move in the same direction
  • Continued higher oil prices due in part to global
    competition as supply and demand remain tight
  • Demand for natural gas is expected to rise in the
    coming year
  • Current US natural gas prices cannot attract
    significant LNG at this time
  • Increased competition to obtain growing Rockies
    natural gas production
  • Resulting in continued pressure in PNW for
    Canadian natural gas supplies to make up the
    difference.
  • Natural gas storage re-fill season tracking below
    2007 levelsmore gas will be needed from the open
    market, pushing demand and prices
  • Hurricane season
  • The unknown effect of speculators in the
    commodity market


52
Current CNG WACOG
Projected CNG WACOG
53
Typical Winter Day Supply Stack
2008-2009
54
November 2008 through October 2009 Gas Supply
Outlook and Strategies
  • Peak events unlikely to occur based on most
    recent weather predictions
  • Cascade has sufficient firm supplies flowing on
    our firm transportation to meet load requirements
  • Firm peaking and citygate delivery contracts in
    place
  • Storage accounts will be full by September 30,
    2008
  • Recall released firm capacity, whenever required
  • Pricing will continue to be volatile
  • Use of financial derivatives to minimize impact
    of price fluctuations
  • Continual assessment of portfolio and market to
    seek out opportunities to minimize portfolio
    costs

55
What we are doing for customers
  • Outreach campaign to educate customers about
    higher prices and that now is the time to take
    advantage of the conservation programs
  • Company-sponsored programs offered through the
    ETO
  • Low-income weatherization program
  • Continue to promote low-cost, no-cost energy
    efficiency measures
  • Bill Assistance Programs
  • Winter Help
  • LIEAP
  • OR Low-income Bill Assistance Program
  • Payment arrangements
  • Company policy of no shut-offs in winter when
    temperatures are below freezing


56
Gas Supply and Pricing Outlook
  • Randy Friedman
  • Director, Gas Supply
  • July 2008

57
Prices A Quick Comparison
Source Natural Gas Intelligence, June 2, 2008
58
What Some Experts Are Saying
59
Short and Long Term Factors
  • Oil Prices
  • Economy
  • Demand Elasticity
  • Power Generation
  • Production Trends
  • Storage Levels
  • Weather
  • The U.S. Dollar
  • Climate Change Legislation

60
A Global Fundamental Rising Demand
61
Current Strategies
  • Use Market Volatility to our Advantage if/when
    possible
  • Extendable Swaps, 3-Way Collars, Physical
    Put/Call Combinations, etc.
  • Currently Target Lower Levels of Hedging and
    Storage Injections
  • Look for Opportunities Later in the Summer
  • Keep Diversifying
  • Mist, Palomar, Changes in Customer Recall
    Arrangements

62
WACOG Increase will be Substantial
63
Options for Customers
  • Energy Efficiency Programs
  • Energy audits and equipment tune-ups
  • Programs through the Energy Trust of Oregon
  • Funding and rebates through NWNs Oregon Low
    Income Energy Efficiency (OLIEE) program
  • Bill Paying Assistance
  • Gas Assistance Program (GAP)
  • Low-income Energy Assistance Program (LIEAP)
  • Oregon Low-Income Gas Assistance Program (OLGA)
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