A survey released yesterday by the American Gas Association of69 gas local distribution companies shows LDCs last winter made ashift to more short-term gas supply contracts. The percentage ofpeak-day gas purchases made under long-term supply agreementsdeclined to 35% in winter 1998-99 from 38% in winter 1997-98, andthe percentage of LDCs with more than half of their peak-daypurchases under long-term arrangements dropped to 38% from 47%during the previous winter. Spot market purchases accounted for 10%of peak-day supplies on average compared to only 5% during theprior winter, AGA said. Storage deliveries comprised 41% ofpeak-day gas supplies.

AGA’s Chris McGill noted survey readers should keep in mind thesurvey sample is much larger this year, with responding LDCsaccounting for a total peak-day gas send-out of 40 million Dthcompared to a survey sample representing about half that during theprevious year. In addition, the results should be weighed keepingin mind that last winter had 9% fewer heating degree days (Octoberthrough March) than normal compared to 8% fewer than normal duringwinter 1997-98. Gas prices last winter also were significantlylower than during the prior winter.

Despite the warmth, about one in six survey respondents saidthey experienced at least some minimal loss of firm supplies at thecitygate sometime during the winter. Forty two of the 69respondents also said operational flow orders were declared on atleast one of the pipelines serving their system.

In the area of gas pricing, the findings show a continuing heavyreliance on bidweek data. Of the 56 companies purchasing mid-termsupplies (greater than one month but less than a year), 90%utilized first-of-the-month pricing for a portion of theirsupplies, 44% used daily spot prices, 23% used fixed multi-monthpricing and 11% used weekly pricing mechanisms.

The survey also found a heavy reliance on supply hedging. About75% of the LDC respondents are relying on financial instruments tohedge a portion of their supplies, and of those, 34% hedge morethan half their gas purchases. Fixed-price contracts were the mostwidely used tool. And more LDCs used options contracts rather thangas futures contracts to hedge their supplies. Twenty-one percentof the survey participants utilized options while only 11% usedfutures.

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