Expanding upon its testimony Monday before the Senate Energy and Natural Resources Committee on dampening price volatility and improving storage surveying methods (see Daily GPI, Jan. 25), AEP’s written comments to the committee went a little further.

AEP said current storage and market information is not currently adequate because it “does not provide checks and balances that allow market participants to assimilate and verify storage information timely enough to minimize price volatility.”

The company noted that because natural gas storage inventory changes represent the timeliest, and likely the most accurate measure of supply and demand balances in the United States natural gas market, the Energy Information Administration’s (EIA) inventory report is a data point “capable of causing significant price movement.” As a result, AEP told the committee that the markets will function more efficiently and with less volatility if more comprehensive and verifiable storage data is made available.

Among its comments, AEP recommended improvements and actions by the EIA, the Federal Energy Regulatory Commission and the National Weather Service to achieve this goal.

The company said that in order to reduce the market’s skepticism over survey methodology and the frequent disconnect between weekly inventory levels and month ending levels, the EIA should survey all storage operators each week that participate in the monthly storage survey. AEP noted that prior to the most recent expansion of operators surveyed, salt caverns were substantially underrepresented based upon EIA’s published methodology of selecting storage fields for survey.

AEP noted that the EIA surveys 292 fields weekly as reported by 56 respondents, representing approximately 91% to 96% of the various regions working gas volumes, but not necessarily a comparable amount of injection or withdrawal capability given the rapid response capable by salt dome storage. On the other hand, EIA surveys 100% of the working gas capacity each month comprised of 395 fields and 120 respondents.

“EIA has stated they cannot extend the weekly reporting due to limits imposed by [Office of Management and Budget] that stop intrusive reporting requirements by government agencies,” AEP said. “While we agree with this principle, the uncertainty and potential mistrust of the EIA’s numbers and the attendant economic cost to the economy merit extending the survey to 100% of respondents each week.”

In addition, AEP said it believes that the EIA should be encouraged to have an internal analyst conduct a projection of the weekly report similar to industry’s effort, using weather, prior reports, regression analysis and other techniques to project the upcoming weekly value. “Prior to the numbers release the analyst should have access to the actual survey results, and determine whether submitted data needs to be verified prior to the release,” AEP said.

On FERC’s part, AEP said the Commission should implement a requirement that all interstate pipelines that operate storage should post an estimate of daily storage inventories. The company said postings of the normal five day workweek should prove sufficient and that this FERC requirement should have a safe harbor presumption that protects operating employees from liability for incidental posting errors.

On the topic of aligning storage with weather, AEP advised that the National Weather Service should produce national level Heating Degree Day (HDD) calculations coincident with the weekly time that storage operators capture their inventory data for reporting to EIA. The NWS publishes these factors for Saturday-to-Saturday temperature experiences.

“Recognizing that the storage data is compiled based upon inventories Friday morning, the NWS now publishes a midnight Thursday temperature report for the prior week,” AEP said in its comments. “This more closely corresponds to the weekly storage inventory allowing better analysis to occur of weather related demand. It could be further improved if they had the ability to produce the report on the same time element as the weekly storage operator inventory, which corresponds to 9 a.m. Central Prevailing Time [Friday].”

In addition, AEP said the NWS should conduct a peer review with industry and governmental representatives on the methodology and calculations used to weight temperatures into HDD’s for gas heating, oil heating, electric heating and population.

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