Services

Operations Department

Whether you use natural gas to generate electricity, directly deliver to customers, or both, FGU has what it takes to manage your gas supply needs reliably and cost-effectively. Joint action allows us to purchase gas at favorable prices and in large quantities, positioning us to be your supplier of choice. It’s not necessary to use FGU on an “all-or-nothing” basis. We can handle purchasing just a portion of your gas requirements, or we can do it all! We will work with you to determine the best use of your internal resources and how FGU can help save you money.

Natural gas is typically purchased from producers and marketers in four (4) ways:

Long-term discounted gas transactions, also called pre-paid transactions, that require the issuance of bonds for extended periods, usually for 30 years or longer.

Term gas purchases, typically for a couple of years or less, are also done to “lock in” favorable prices.

Baseload gas is purchased for a calendar month at negotiated monthly prices to meet a portion of the monthly needs of each Member.

Swing gas is purchased, usually on a daily basis, to precisely match the expected usage of each Member with the total supply acquired through the four methods described herein.

FGU secures a combination of long-term, monthly, and daily purchases with numerous natural gas suppliers and analyzes a variety of Member-specific requirements, including Member-specific pricing objectives, long-term market opportunities, optimal receipt and delivery point utilization, pricing forecasts, and imbalance resolution.

In addition to optimizing such factors, FGU can provide low-cost, reliable natural gas to its Members by maintaining a large supplier base. (In fact, FGU currently maintains contracts with more than 70 gas producers, marketers, and suppliers!)

Furthermore, Members are allocated their proportionate share of FGU’s aggregated monthly purchases and typically blend some amount of monthly and daily acquisitions to comprise the FGU “system supply.” FGU’s weighted average cost of gas (WACOG) for system supply is consistently below relevant market benchmarks.

Numerous producers and marketers have gas supply and are willing to sell it at specific locations along the interstate pipeline systems. These locations are called “receipt points” along the interstate pipelines. Florida Gas Transmission (FGT) has about 70 operationally available receipt points in its production area. The gas trader must constantly evaluate what gas purchases (project, term, baseload, and swing) have been made, at which specific receipt points the gas is being received, and which capacity contracts are being utilized to transport the gas to the appropriate delivery point. Hence, the gas trader must navigate a complex set of variables to determine the quantity of gas to purchase at any given time. These variables include:

  • whom to purchase from
  • how much
  • at what price
  • at what receipt points
  • at what length of time (long-term or a single day)
  • type of capacity being used (primary or secondary firm) for transportation
  • Member’s needed quantity
  • monthly imbalance position
  • other important information
  • whom to purchase from
  • how much
  • at what price
  • at what receipt points
  • at what length of time (long-term or a single day)
  • type of capacity being used (primary or secondary firm) for transportation
  • Member’s needed quantity
  • monthly imbalance position
  • other important information

Establishing and maintaining relationships with potential suppliers is very important and being “in the market” on a daily basis increases the chances that a competitive and reliable gas supply is consistently achieved for Members. Traders also must be aware of and consider conditions that limit access to interstate pipelines, such as maintenance activity, operational orders, force majeure events, and other similar situations.

To utilize storage assets to their fullest potential, the complex storage contract terms and conditions must be understood. Armed with this information, traders can effectively inject gas into storage during times of low usage and low prices and withdraw gas from storage during times of high usage and high prices. When appropriately utilized, storage gas can be leveraged to optimize the weighted average cost of gas (WACOG) for Members.

To utilize storage assets to their fullest potential, the complex storage contract terms and conditions must be understood. Armed with this information, traders can effectively inject gas into storage during times of low usage and low prices and withdraw gas from storage during times of high usage and high prices. When appropriately utilized, storage gas can be leveraged to optimize the weighted average cost of gas (WACOG) for Members.

  • Historical gas usage
  • Current and predicted weather conditions
  • Accumulated monthly imbalances
  • Member-provided anticipated changes

Pipeline capacity is utilized to meet the requirements of FGU’s Members. After such requirements are satisfied, FGU actively pursues daily, monthly, and long-term opportunities to use any remaining excess capacity, oftentimes relinquishing it to third parties. Excess aggregated Member capacity creates the Alternate Delivery Point (ADP) pool. Members have the ability to both sell into and buy out of the ADP pool as needed. For any quantities of storage, a Member sells to other FGU Members and/or third parties, that Member receives the financial benefits.

Once the quantities of natural gas have been acquired, it must be nominated and scheduled on the pipelines on capacity contracts held by the Shipper. The nomination and scheduling process also includes identifying any supply cuts made by the pipeline, monitoring for changes in consumption due to electric generating units unplanned outages, changes in weather, and other events that impact the amount of gas consumption. Changes to scheduled quantities are at pre-determined times during the gas day through the intra-day nomination processes for each pipeline.

The difference between the scheduled volume and the consumed volume is the point’s imbalance. Imbalances occur daily and are currently traded on a monthly basis. Each point is scheduled based on their projected needs. FGU’s aggregated delivery point operator account (DPOA) allows it to manage the imbalances of the Members on that account as one unit. Effectively, each point’s imbalance is netted and traded within the account before moving to the next phase. These imbalances are monitored daily, and some imbalance trading takes place during the month to manage the cost of gas. Any imbalance remaining at the end of the month is handled through book-out trades with other shippers or by cashing out with the pipelines. These financial transactions allow the Members to receive the best recovery possible for the previous month’s imbalance.

The primary function of the Delivery Point Operator (DPO) is to effectively manage and mitigate the potential adverse effects of operational orders issued by the pipelines (alert days, operational flow orders, etc.) and month end imbalance positions. Generally, the more members that belong to the same DPO account and the higher the scheduled quantities, the more likely it is to mitigate any negative impacts. Operational orders, in effect, mean daily balancing. Scheduled quantities must be within defined tolerances (over or under) when compared to measurement data from every delivery point (the “aggregated delivery points”) that the DPO administers for each day that an operational order is in effect. Failure to be within defined tolerances during an operational order will result in significant penalties. Similarly, for month-end imbalances, the difference between the amount of gas scheduled for the entire month and the amount of gas measured at the aggregated delivery points must be within established tolerances (less than 5%) to obtain the best cash-out prices. Of course, booking out imbalances with other Shippers is allowed and can be done to reduce the monthly imbalances below the 5% tolerances.