With regulatory changes and greater competition increasingpressure on gas utilities to stay competitive with their gaspurchases, the last thing they need is another warm winter toconfuse their gas purchasing and storage plans. NGC Corp. isoffering several new financial products utilities and largeendusers may find useful in reducing exposure to unpredictableweather and volatile market conditions.
Its Storage Investment Insurance works for utilities that havealready purchased their winter season gas supply. It providesprotection from falling prices for each usage month elected.
“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. “[B]asically for a premium utilities or industrials canbuy the right to sell us gas back at a location at a price. Itlimits their downside and keeps them competitive in an El Nino typewinter.”
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.
NGC’s Gas Purchase Protection (GPP) offers customers purchaseprotection from future increases in gas market prices. The purchaseof GPP allows the customer to lock in a pre-specified volume of gasfor a future price and for a future delivery date.
“The size of [NGC], our ability to deliver and to transport andof course the financial market,” enable NGC to offer theseproducts, he said.
©Copyright 1998 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press,Inc.
© 2022 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |