As last winter showed, big temperature and price swings canwreak havoc on a utility’s gas procurement and storage plans. Butthere’s really no need to fret, according to NGC Corp. It hasrolled out a new line of gas insurance packages, designed to reduceutility and enduser exposure to volatile market conditions.

“If you remember what happened last [year], people were puttinggas into storage [in the summer] at $2.40 and $2.50 and they werepulling it out in January at $2.10. That makes the utilities prettyuncompetitive,” said Mark Ludwig, NGC’s senior vice president inChicago. NGC’s Storage Investment Insurance provides protectionfrom falling prices for utilities that have already purchased theirwinter season gas supply.”[B]asically for a premium, utilities orindustrials can buy the right to sell us gas back at a location ata price. It limits their downside and keeps them competitive in anEl Nino-type winter.”

Ludwig said an LDC might want to begin buying gas for storagetoday at $2.70/MMBtu. But if they fear the gas might not be worththat in January 1999, NGC could offer to buy the gas from them inChicago in January for $3.10/MMBtu. The premium customers pay isdependent on the location NGC would be buying gas back, the monthin which it would be buying it and the price NGC would pay.

Another insurance product, NGC’s Gas Purchase Protection (GPP),offers customers protection from future increases in gas marketprices. The purchase of GPP allows the customer to lock in apre-specified volume of gas for a future price and for a futuredelivery date.

“The size of [NGC], our ability to deliver and to transport andof course the financial market,” enable NGC to offer theseproducts, said Ludwig.

Rocco Canonica

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