Faced with declining electric unit sales due to efficiency gains, modest economic growth and customer migration from electric to natural gas appliances, Jacksonville, FL, public power utility JEA is getting into the gas business as a supplier to commercial and industrial consumers.

Already the largest consumer of natural gas in northeast Florida for its power generation facilities, JEA will use its existing gas procurement operations to buy more of the commodity and resell it through the customer choice program offered by local distribution company TECO/Peoples Gas, called Natural Choice.

JEA is active in the gas market every day to meet its needs for power generation, buying about 100,000 MMBtu/d, Mike Brost, JEA vice president and general manager of the utility’s electric business, told NGI.

“We think we can leverage that position and be competitive,” he said. “One of the reasons [to do this] is revenue, No. 1.” Revenues have been flat in the power business due to a slow recovery from the last economic recession as well as significant gains in electric appliance and equipment efficiency. Over the last decade, unit sales in the utility’s power business have been declining.

“We’re adding meters every year, but the typical customer is using much less electricity per month than they were 10 years ago,” Brost said.

Further, whenever a large commercial or industrial customer served by JEA replaces an electric appliance with one fueled by natural gas, the utility loses electricity sales volume. If JEA is also the customer’s gas supplier, at least there will be some new business to be had from the switch. “It’s not as profitable, but I’ll get some offsetting revenues,” Brost said.

The ability to sell gas to commercial and industrial consumers also prepares JEA for potential competition to come from companies that choose to self-generate their power. “Who knows what the future holds, but a lot of commercial and industrial customers are looking seriously at self-generating, and especially if they’ve got a combined heat and power opportunity,” he said.

JEA, which also sells water, sewer and reclaimed water services, could be their gas supplier, too. “If I don’t partner with them, I’m sitting back losing electric unit sales. If I’m part of the [cogeneration] project, I can participate in that and maybe mitigate the lost revenue.”

Back on the gas procurement side, buying more of the commodity could help JEA wring more value from the interstate pipeline capacity it currently holds to serve its power plants. Much of the time the utility is not using all of its pipeline capacity because it’s not in a peak demand situation. Some of that “wasted, unused capacity” could be leveraged to serve gas customers, Brost said.

Brost said JEA plans to start out small with a couple of gas customers and grow the program. One type of customer that is particularly attractive is compressed natural gas (CNG) and liquefied natural gas (LNG) producers.

“We would be interested in being the upstream gas provider for those sorts of operations,” Brost said, adding that “there’s a little bit of CNG going on [see Daily GPI, Feb. 25].” There also are LNG projects to serve marine, export and other markets to which JEA could become a natural gas supplier.

“Those are the important customers for us to go after,” he said. “The nice thing about them is they’re curtail-able. They’re sitting there running 24 by seven filing the tank, and all they really care about is when it’s time to offload the tank they’ve got to have enough in there. They don’t care whether they’re running at midnight. So we ought to be able to help shape the aggregate demand. And they’re very large volumes. Most of the other customers are going to be fairly small.”

While it’s just now getting into the gas supply business, JEA has seen the role of natural gas grow significantly in its power generation operators over the last two decades, Brost said. “A big chunk” of the utility’s $500 million per year fuel spending goes to natural gas.

“It’s grown over the last 20 years or so,” Brost said. That’s because of cheap gas, mainly thanks to shale plays and hydraulic fracturing. Gas-fueled combustion turbines have made significant efficiency gains, too. They’re not just for peaking anymore but now run baseload, pushing out coal plants. “It’s cheaper than solid fuel, cheaper than coal,” Brost said.