Coping with a colder-than-normal 2000-01 winter heating season, local distribution companies went into the spot market for 13% of their peak day purchases, compared to 9% the previous winter, according to an American Gas Association survey of 50 LDCs.

Long-term contracts supplied 26% of peak day purchases last winter, compared to 29% the previous winter and mid-term agreements (greater than one month, but less than or equal to a year) accounted for 48% of the LDCs’ peak day gas purchases, AGA said.

The winter was characterized by extended colder-than-normal temperatures during the early part of the winter season, followed by more moderate temps from mid-January on. “Beginning with the week ending Nov. 11, 2000, national heating degree day (HDD) data revealed nine straight weeks of colder-than-normal, resulting in the coldest November-December period on record.” From that point on, the bulk of the weeks were warmer-than-normal, but that didn’t keep the winter as a whole from being classified as colder-than-normal for every census region in the country. Overall there were 4.8% more heating degree days than the 30-year norm. AGA said 98% of survey respondents reported colder-than-normal temps in their service areas.

On the whole there were “few significant challenges” in the pipeline delivery system, AGA said. While there were numerous operational flow orders, most were resolved expeditiously.

Only 21 of 49 LDCs said they used financial instruments and fixed price contracts to hedge a portion of their supply last winter. Fourteen said they used fixed price contracts, sevne reported hedging using futures and six used options. Several used swaps. Five out of 46 said they used weather derivatives as a hedging tool. The report noted that some of the LDCs’ purchases may already have been hedged by the marketing companies they purchased the gas from.

Going forward 28 of 47 companies said they expected to hedge more of their gas volumes for the coming winter season, while only four said they would hedge less.

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