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Northeast Energy Markets: Windfall or Washout?

Fortnightly Magazine - January 1 2000

percent and 78.9 percent, respectively. According to the American Gas Association, estimates derived here for 1998, we get an estimate of 38 percent for penetration and 78.6 percent for saturation.

10 This estimate was obtained from "Residential Energy Consumption Survey," 1997, EIA. This report provided a separate estimate for customers in New England. Separate estimates for New York are not available. The lowest level of aggregation that includes New York is the Mid-Atlantic, which includes Pennsylvania, New Jersey and New York. The New England estimate is used for New York here.

11 "Issues in Midterm Analysis and Forecasting," 1999, EIA.

12 Overbye, Thomas J., Douglas R. Hale, Thomas Leckey and James D. Weber, "Assessment of Transmission Constraint Costs: Northeast Case Studies," to be presented at the IEEE Winter Meeting in February.

13 Non-utility providers often negotiate and pay a charge to use the utility's distribution system to serve the customer, but they do not provide information on the negotiated price to the EIA. However, the EIA obtains information on the volumes and the number of customers because the utility still delivers the gas to customers.

14 For a detailed economic evaluation of distributed resources see "Information to Support DR Business Strategies: Quantitative Analysis of DR," EPRI.

15 It has been increasingly difficult for EIA to obtain comprehensive and accurate data for off-system sales especially for large industrial customers because of the wide variety of arrangements used to arrange for receipts of gas. In addition, when utilities sell off generation, the sold generation is classified as non-utility or industrial-sector power generation. Thus, the use of natural gas by such generators should, in principle, be included in with electric utility consumption until they are sold (most of the generation sales in the Northeast occurred in September 1998 and in June 1999.) After they are sold, the use of natural gas by such generators should be included in the industrial sector. Obviously, the data accounting doesn't capture this well. In addition, the change in accounting makes the use of most recent data as a basis for forecasting most difficult. In the Northeast, 7,328 MW and 8,559 MW of utility plants in 1998 and 1999 (as of June 1999) was reclassified as non-utility plants. This is particularly important because these plants are major growth sectors for natural gas and power generation. These generators also have a greater incentive to operate longer hours, seek out profit opportunities and hence use more natural gas than otherwise similar plants. Thus, this change in terms of obtaining accurate forecasts also is of great importance.

16 "Annual Energy Outlook," 1999, EIA. The difference in the oil and gas prices declines over time, but the decline in the most recent forecast volume (for 2000) is less than in the previous forecast volume because end-use sector restructuring is progressing more slowly than expected.

17 For a discussion of matters concerning growth in residential markets, see John H. Herbert, "Clean Cheap Heat - The Development of Residential Markets for Natural Gas in the United States," Praeger, New York, N.Y., 1992.

18 Significant changes have