Winter Reliability Assessment En Banc Hearing Docket No. M

Transcription

1 225 North Shore Drive Pittsburgh, PA TEL FAX November 4, 2005 James J. McNulty Secretary Pennsylvania Public Utility Commission Commonwealth Keystone Building 420 North Street P.O. Box 3265 Harrisburg, PA Re: Winter Reliability Assessment En Banc Hearing Docket No. M Dear Secretary McNulty: Enclosed please find the written responses of Equitable Gas Company ("Equitable") to the questions addressed to natural gas distribution companies in the October 20, 2005 procedural order. Due to the change in hearing date, Equitable's spokesperson, David Spigelmyer, will be unable to attend the hearing. Accordingly, Equitable will have several employees available at the hearing to answer questions in the following areas, if necessary: Since this hearing ostensibly is about winter reliability, Stephen Rafferty, Vice President of Utility Management will be the Company's primary spokesperson and will answer questions related to gas supply, gas contracts, transportation and curtailment issues. Questions concerning rates and tariff issues will be answered by John Quinn, Director of Rates. Questions related to customer service and consumer education will be answered by Sandra Gagorik, Manager of Universal Services. I will also be in attendance and available to answer any other questions the Commission or its staff may have. Yours very truly, Daniel L. Frutchey Senior Vice President and General Counsel Pa. ID No

2 Item: WR-1 Beginning with the gas cost prices currently approved by the Commission, provide your monthly projected prices through March 31, Due to factors beyond our control, including the volatility in the natural gas market and weather related impacts, Equitable is not able to accurately project the price of gas for the Company s next quarterly Purchased Gas Cost (PGC) filing scheduled to be submitted to the Commission on December 31, However, in an attempt to respond to the Commission s request in this proceeding we have relied upon information that is known and measurable as of November 3, 2006 to provide the following projected range for gas cost prices effective January through March of 2006: Forecasted Gas Cost Rates for Equitable Gas Month Current November December January February March Gas Cost Rate $ $ $ $ $14.72 $ $14.72 $ $14.72

3 Item: WR-2 What is the status of storage (percent of storage filled currently, and projected fill levels by the end of the injection season) and supply impact, if any, on contracts for firm supply this winter as a result of hurricanes Katrina and Rita? What is the level of your dependence on non-firm supplies over the winter? Include specific information on the percent of winter supply covered by storage capacity this year. As of October 31, 2005, the Company s aggregate storage position was over 95% full. The Company typically reserves some space during November in the event there is warmer-than-normal weather. Based on weather experienced to date and longer-term projections, the Company expects to have storage full by mid-november. From a supply perspective, the Company has not been significantly impacted by hurricanes Katrina and Rita. Gas supplies are available but the price is exceptionally high. The Company purchases all of its interstate supply on a firm basis. The only non-firm supplies that the Company purchases are local Appalachian production. If there are operational constraints or well freeze-offs the Company can utilize its storage assets to meet the demand requirements. Firm storage capacity is an essential element of Equitable s supply portfolio. Storage capacity is utilized to meet the winter peak requirements of the Company s largely residential, weather-sensitive customer base. Storage is used to meet approximately 50-60% of the Company s demand requirements during the winter season, November through March.

4 Item: WR-3 What is the expected demand of supplies under contract and how do you plan to meet system needs? Provide a specific break down of storage supplies, hedged price supply, monthly index supplies, spot purchases and other (description). Provide information on the types of indices and price references used for index contracts and hedging. Equitable purchases its gas supplies based on an acquisition strategy that minimizes gas purchase costs while assuring there is adequate, reliable supply. Adequate and reliable means that planning is based on assuring deliverability during peak demand periods under design day conditions. In addition, factors including historical dependability and reliability are considered. Finally, adequate and reliable means that the gas quality and the operating pressures are consistent with the Company s needs and qualitative standards. Demand Requirements: 21,500,000 Dekatherms ( Dth ) Supply Requirements: Storage: 50% Local Appalachian Supply: 20% Southwest Purchases: 30% Firm storage capacity is an essential element of Equitable s supply portfolio. Storage capacity is utilized to meet the winter peak requirements of the Company s largely residential, weather-sensitive customer base. Storage is used to meet approximately 50% of the Company s demand requirements and is essentially hedged since the storage inventory has a weighted average cost of gas ( WACOG ) that was developed based on the previous summer injection prices. Equitable has a local Appalachian gas purchase strategy that consists of various pricing mechanisms, ranging from fixed pricing options to several different index-pricing options. This strategy attempts to encourage the development of new, incremental supplies while also attempting to reduce the price volatility and operational uncertainties. Equitable utilizes short-term gas purchase agreements, long-term gas purchase agreements and existing life-of-the-well gas purchase agreements to provide a stable, long-term source of reliable supply. The indices utilized by Equitable for gas procurement are published by Platt s Inside FERC s Gas Market Report and/or Platt s Gas Daily. The price reference for fixed-price purchases is typically the NYMEX futures prices.

5 Item: WR-4 What are your contingency plans if your gas supply is curtailed? Do the supply contracts include financial penalties for failure to perform or if force majuere is declared? The Company s contingency plans for addressing gas supply curtailments are dependent on the duration of the curtailment. The Company can utilize its storage assets to manage short-term curtailments by making withdrawals any time during the year, not just during the winter season. Long-term curtailments are more problematic. Long-term curtailments could require the Company to interrupt load on its distribution system. The interruptions would be in accordance with the procedures outlined in the Company s PA PUC Tariff. The Company s gas purchase agreements include financial penalties for failure to perform. Typically, financial penalties are not relevant if force majuere is declared.

6 Item: WR-5 What is the status of your curtailment plans? What plans and actions, if any, have you taken with regard to interruptible load for this winter? The Company has an interruption policy and a curtailment plan that, if implemented, would be in accordance with the procedures outlined in the Company s PA PUC Tariff. The Company has recently notified interruptible customers reminding them that their existing contract with Equitable is for interruptible service and that despite diligent efforts, factors beyond Equitable s control can sometimes affect the deliveries of natural gas to the Equitable Gas distribution system. Adverse weather conditions, operational constraints and interstate pipeline interruptions can occur, especially during the cold winter months, and these factors can affect the deliverability of natural gas supplies into Southwestern Pennsylvania. Furthermore, these customers were also reminded that interruptible service is intended for those customers that can withstand an interruption or curtailment of natural gas service for an extended period. Customers having interruptible service that cannot withstand an interruption or curtailment of natural gas service for an extended period are advised to have fully functional alternate fuel capabilities.

7 Item: WR-6 What is your outlook for transportation and storage of natural gas on interstate facilities for delivery to your system over the next five years? Several interstate pipelines have recently announced or concluded open-seasons for projects designed to create additional storage and /or transportation capacity. These interstate pipelines include Dominion Transmission, Inc., Tennessee Gas Pipeline, and Columbia Gas Transmission. All of these interstate pipelines have the ability to ultimately make deliveries into Equitable Gas Company. Recently, Equitable Gas Company extended several firm storage and firm transportation contracts that it has with Dominion Transmission, Inc. and Equitrans, LP. These contracts were extended for multiple years and are utilized by the Company to meet its firm demand obligations. The Company also has a firm transportation contract with Texas Eastern Transmission that expires during The Company supports longer-term commercial transactions for gas procurement and storage/transportation services in an effort to adequately finance investments designed to meet the growing demand for reasonably-priced natural gas in the future.

8 Item: WR-7 Plans for responding to the cold weather survey including: In the event you have contact with a customer how do you plan to help them manage higher prices? What plans, if any, do you have to be less restrictive than Chapter 14 when negotiating terms for restoration? What is the status of current households without service how many households are off as of November 1, 2005? What are your plans for pursuing termination during the winter period (December 2005 through March 2006)? The Company intends to assist customers with managing higher commodity prices by educating our customers regarding our budget program. The Company has also recently announced a shareholder contribution of $2 million to be used to assist our low-income and needy customers and has plans to heed the request of Governor Rendell to create other innovative solutions to assist our customers in managing higher gas prices this winter. Equitable is also involved in extensive outreach efforts to inform and assist customers in applying for the Low Income Home Energy Assistance Program (LIHEAP). These efforts include partnering with Dominion and Columbia in advertising LIHEAP through TV, radio and local newspaper advertisements. The three-company coalition has also established LIHEAP sign-up days at area locations on November 18 and 19, as well as creating special toll-free numbers where customers can get additional information on LIHEAP and/or a LIHEAP application. In addition, Equitable sends special notifications to customers, who previously received LIHEAP to remind them of program opening dates, and also inserts LIHEAP information in all residential bills. For the past three years, Equitable has contracted with an outside organization to make direct telephone contact with customers who appear to be eligible, but have not previously received LIHEAP. The contractor completes an application by phone and sends the completed application together with a stamped, self-addressed envelope for the customer s signature. Equitable is in the process of completing the 2005 Cold Weather Survey in accordance with 52 Pa. Code Section (4) and Section (5). The results of the survey will

9 be contained in a mid-december report to the PUC. Effective November 1, 2005, there were approximately 5,300 households without service compared to 3,951 and 4,954 in 2004 and 2003, respectively. In 2004, 52% of the surveyed customers were reconnected by December and 43% in The Company expects similar or improved restoration percentages this year due to Equitable s contribution of additional hardship funding. Please note that there are still approximately 4,400 accounts that are in the process of being surveyed for alternative heating sources as of November 1, The Company intends to follow the winter termination procedures as detailed in Chapter 14, wherein delinquent customers who are proven to be over 250% of the federal poverty level may be subject to termination this winter.

10 Item: WR-8 What actions have you taken or plan to take to educate consumers about the escalating natural gas prices and ways to conserve energy? Beginning in September and continuing to-date, Equitable's call center representatives have been particularly sensitive to ensuring that customers understand that this winter's gas prices will be high, and to encourage customers to pursue conservation and budget billing as a means to counteract the price increases. Equitable also has participated in public forums throughout its service territory, published notices in local newspapers, funded public service announcement on television and the radio, and created several pieces of literature for distribution to customers as bill inserts. Attached are some examples of printed materials sent to customers.

11 Item: WR-9 What mutual aid agreements do you have in place to address restoration of service after a major outage? The Company does not have formal mutual aid agreements, nor does it believe they are necessary. Generally, gas outages related to system (i.e. non-supply) failure are confined to small areas. The Company has a number of resources available to it to restore service, including individuals from our own workforce, numerous full and part-time contractors, affiliated utility company employees, and offers of assistance from other gas companies.

12 Item: WR-10 What is your outlook and plan for addressing distribution system pipe freezes? Equitable Gas Company has several initiatives designed to minimize distribution system pipe freezes. The Company requires that all supplies delivered into the distribution system must adhere to minimum gas quality specifications outlined in Equitable Resources Operating Standards for gas quality. These specifications establish the quality requirements of gas delivered to, contained within, and provided from Company pipelines, meters, compressors, interconnects, etc. designated as transmission and distribution facilities. Most of the water vapor introduced into the distribution system comes from local production wells. However, producers realize that it is in their best interest to minimize the introduction of water vapor, as it could result in their production being shut-in. In addition to the operating standards, the Company employs other methods to protect the operating system from hydrate formation, freezes and moisture problems, including: Installation of numerous gas dehydration plants. Installation of catalytic heaters as necessary. Performing spot dew point tests on local gas well production. Installation of indirect water bath heaters at high volume regulator stations and city gates. Installation of desiccant filters on gas wells, pipelines and meter sets to remove water vapor. Installation of drip tanks to remove water from low-pressure pipeline systems in flood-prone areas.

13

14

15

16