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The 1998 Gas Industry Executives Forum Mapping the Universe of Natural Gas: Closed, Shrinking or Expanding?

Fortnightly Magazine - May 1 1998

questions and they've received thousands and thousands of calls about the electric pilots. Our office has put out a brochure and met with a lot of consumers. I think people need to be able to call somebody who has no particular financial stake in whom you buy from.

Steven E. Winberg, director, energy policy, Consolidated Natural Gas Co.

ELECTRIC DEREGULATION. There are probably three effects. On the supply side, for electric generation, I think it's going to open opportunities for gas-fired, combined-cycle plants. As the industry starts to get a better handle on what the marginal cost is to generate power at a given station or at a given load at a particular station, I think that's where natural gas is going to come into it's own.

Also on the supply side, there are the environmental issues that we're looking at: the ozone issue in the Northeast; the reach of the Environmental Protection Agency further west to deal with NOx emissions; and global warming.

I think the combination of environmental issues and the deregulation of electricity potentially are two freight trains coming at each other. And natural gas can play a significant role there. There's an increased interest these days in distributed generation, in fuel cell technology, to get at the efficiency lost from a large coal-fired central generating station to the light socket. The closer you bring the generation source to the point of use, the less efficiency loss you're going to see. I think that when you're looking at global warming, efficiency is the major cure for CO2.

In addition, I think as power quality (em not just in terms of the power failure or loss of electricity but the actual quality of electricity (em becomes more and more important, and we get more sensitive equipment, there's going to be a need for high-quality power. And I think that's probably a role for natural gas either in distributed generation or fuel cell technology.

On the retail side, I think it's pretty obvious that gas deregulation is a lot further along than electricity deregulation. Industrials and commercials have been transporting gas for years [buying their own gas from marketers and obtaining transport-only service from LDCs]. A lot of states are moving into retail choice for their residential sector, both in electricity and gas. And the combination of those two services into the home or small business is going to become pretty important. It's clear that every marketer out there plans to be a marketer of both gas and electricity. [Because] a lot of states are looking at electric restructuring, gas will follow very shortly thereafter because customers are going to want that choice, and they're going to want to have that single energy provider.

HOURLY PRICING. Power will be priced on an hourly basis, no question. But I think that, at least relative to coal, gas probably is in a better position to match the hourly pricing structure that we're likely to see. Oil probably can as well, because there's a lot of liquidity in the oil market. So if the