Natural gas

All versions of the "revolution" in the electric power industry seem to turn on the prospect of competition in generation.

According to the Natural Gas Vehicle Coalition (em a national organization of local natural gas distributors, pipelines, and equipment manufacturers promoting natural gas vehicles (NGVs) (em the U.S. government supports our country's continued reliance on petroleum-based fuels for transportation through billions in subsidies and tax incentives.

Average generation costs for the nation's electric utilities fell in 1994, primarily due to reductions in delivered fuel prices. Production costs declined by 3.5 percent, averaging just $1.89 per kilowatt-hour (Kwh) by year's end.

The WSCC is the only NERC (North American Electric Reliability) region where production cost increased (em 2.6 percent in 1994 (em as reduced hydro output in California was replaced by more costly natural gas-fired generation.

Gas pipeline reform is looming on the horizon like the stealth bomber. It faded from view a couple years ago, when the Federal Energy Regulatory Commission (FERC) completed Order 636 and turned to electric issues. Yet gas reforms are more pressing: They began earlier, their direction is clearer, and their completion is closer at hand. In fact, without a more price-responsive market for gas transportation, we cannot fashion an efficient and integrated energy industry.

The other day I heard a short news item on National Public Radio that made me stop and think. The item ran something like this: "Maxwell House has announced it will cut the price of its loose ground coffee to reflect a drop in the coffee futures market several months out."

Wasn't that easy? Call it integrated resource planning in the espresso lane. Note what Maxwell House did not do. It did not solicit a demand forecast or run the PROMOD computer model.

In less than a decade, three powerful trends will converge on gas distributors.