Washington Gas Light Co. (WGL) has applied to the Virginia State Corporation Commission (SCC) to combine its winter gas hedging program and a pilot summer storage gas financial hedging program the company started in 2006.
By combining its storage injection and winter baseload hedging programs on a permanent basis, WGL would have the flexibility to execute transactions across seasons and could lower transaction costs associated with its hedging activities, the company said.
In addition to combining the two hedging programs, WGL seeks authority to revise certain features of the combined hedging program, including:
In its application WGL said it is necessary to expand the time period for executing hedging transactions in order to take advantage of lower prices or volatilities that could improve the results of its hedging program. It also said use of financial transactions for winter baseload hedging is necessary because there are times when options can be a better, more flexible alternative than fixed-price transactions for hedging purposes.
WGL first received approval for a permanent winter season hedging program in 2005. The next year the SCC authorized WGL to implement a pilot hedging program for the company's planned summer purchase of gas for injection into storage for a period due to end at the end of this October.
WGL, a subsidiary of WGL Holdings Inc., delivers gas to more than one million residential, commercial and industrial customers in Virginia, Maryland, West Virginia, Delaware and Washington, DC. WGL serves approximately 474,000 customers in Virginia.
Regulators in Maryland, citing natural gas futures prices "considerably less than the average price for the last three winter heating seasons," last month initiated a proceeding to review the hedging plans of WGL and other gas and electric utilities (see Daily GPI, May 15).
In recent months the Maryland Public Service Commission (PSC) has taken a decidedly hands-on approach to Maryland utilities' gas purchases, ordering each of the utilities to purchase 40% of its summer gas injection needs immediately for delivery through October (see Daily GPI, March 23). In a series of orders the PSC directed the utilities to take actions other than options to assure that 40% of their summer natural gas injection volumes for delivery between April and October "will reflect pricing that reflects a Henry Hub price of $4.32 or less per MMBtu plus basis cost."
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