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Barbarians at the City Gate

Fortnightly Magazine - September 15 1995

too, and can bank on it.

There is no such thing as a free lunch, and revolutionizing the core market won't be the first exception. Reliability is like oxygen (em you won't miss it until it's gone. t

Stephen Huntoon is assistant general counsel at PECO Energy Co. The author thanks Reed Horting, Jim Marple, Gary Armstrong, Paul Bonney, and Steve Xander of PECO and Dan Regan of the Pennsylvania Gas Association for their insights. The views expressed here are solely those of the author.A Marketer's Play BookBuy Cheap. Buy cheaper, nonpeak pipeline capacity (either released utility capacity or interruptible pipeline transportation) to serve core, commercial firm load.

Shun the Peak. With monthly balancing, reserve capacity only for the average daily load. Ignore the monthly peak; you can make it up with deliveries on the warmer days of the month.

Pay the Fine. Even with daily balancing, if you fall short on the peak day just take extra gas from the utility; the penalty (seldom above $25/Mcf) is cheaper than peak-day pipeline capacity.

Play the Spread. Sell "virtual firm" gas using recallable, release pipeline capacity. If you're caught short, you're liable only for replacement fuel. Or you "credit" you customer for the gas he didn't get.A Defensive StrategyEmploy Remote Shutoff Valves. The utility instantly terminates the flow of gas to the customer, aided by accurate, real-time information from the pipelines. Should insufficient deliveries trigger the valve?

Certify Marketers. The utility qualifies marketers as reliable or not, perhaps risking liability for wrong decisions. But with the more aggressive, risk-taking marketers squeeze out the reliables?

Demand Guarantees. Utilities receive assurances from marketers. Affidavit? Surety bond?

Make Penalties Hurt. Penalize unauthorized takes. Convince marketers to sell real firm service. If the utility disqualifies marketers or customers from its service territory, can it ensure enough capacity to resume firm sales?

Enforce Mandatory Standby. Hold firm pipeline capacity under contract, back-stopping the marketer's service. Eliminate the profit margin in selling "virtual firm."

Maintain Monopoly. Keep control over the core market.


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