Transport Gas Corporation (TGC) began as an independent gas marketer:reseller, buying and reselling natural gas, to provide producers, buyers and endusers with gas marketing and transportation services including TGC-owned natural gas supply and TGC-contracted interstate and intrastate gas transportation to effect “into pipe”, city gate or burnertip gas deliveries. For the industrial, commercial and other resale customers, TGC seeks to contract for natural gas supply and related transportation services employing interstate and intrastate transmission lines. For gas producers, TGC seeks secure and profitable term and spot markets. TGC is currently focusing on developing natural gas use in transportation markets and provide gas services/supply. e.g. CNG, to the fast growing transportation fuels sector to truck fleets seeking less expensive and cleaner burning natural gas in conjunction with both new more powerful engine availability and continued significant price differentials between CNG and traditional diesel fuel. Through working with truck fleet operators, TGC can help truck fleets capture lower fuel costs through developing the infrastructure to meet their transportation fuel needs.
As historical background, open access natural gas (and electric) markets have evolved since October 30, 1985 when the Federal Energy Regulatory Commission (FERC) promulgated Order 436 which initiated the change to deregulated US natural gas markets. During the next eight years, FERC issued another 200 orders through 11/1/1993 and largely completed a long and arduous journey from regulated to deregulated gas markets with Order 636. Federal and state legislation as well as over 200 FERC orders have addressed both gas and electric market deregulation over the past 20 years. Additionally gas and electric markets are impacted by State and local factors, sometimes resulting in a regulatory puzzle with deregulated conditions varying significantly from state to state.
With October 30, 1985 Federal Energy Regulatory Commission (FERC) Order No. 436 mandating opening natural gas (gas) and related services (e.g. transportation) markets to competition, the FERC began the natural gas market deregulation process. Interstate pipelines were directed by FERC to transport gas for any applicant meeting its requirements seeking transportation service on a nondiscriminatory basis. As previously in the telephone and airline industries, the effects of gas and electric deregulation impacted regional large and small monopolies and interstate and intrastate natural gas pipelines, electric transmission and local distribution (both gas and electric) companies. Unlike the previous regulated interstate gas and electric markets where gas and electric power producers sold their product either to interstate pipelines or to gas or electric utilities, the deregulated marketplace provided non-utility buyers and sellers an opportunity to make contracts. Gas producers sought their own markets through gas marketer:resellers who bought and sold natural gas as well as agents, some called “marketers”, who then sold their production to industrial, commercial and other gas buyers in addition to utility-based gas purchasing programs. Gas marketing was created and
Today, an “open access” market exists for natural gas service on interstate pipelines and, in many states, to “city gates”. In some states a deregulatory model for electricity also exists. For example, some states have deregulated electric markets and “retail competition” exists, under a regulatory scheme. In other states, for example, California, the regulatory model allows most end-users, both larger industrial and other resale customers to make economic decisions in buying their own gas and power, while other end-user (retail) customers find less than compelling savings. Interstate and local distribution access issues need to be reviewed in specific cases to determine which possible options can be created for end-users, suppliers and resource providers. California’s experience with the ill-fated second price model demonstrated that remaking markets is difficult and may result in serious erosion of previously-assumed market fundamentals. Although no state public utility commission is seeking to curtail end-users rights to purchase their own gas and power supplies where this right currently exists, the rules for market participation can be daunting. Gas and electric power futures markets also significantly impact the physical market. Various stakeholders and market participants including federal and state judicial, legislative and regulatory bodies, utility service providers, gas and electric producers and end-user customers and ratepayers are each impacted by capital market pricing methods.
As George Stigler was reported to have said, “There’s no such thing as a free lunch”. In acquiring natural gas, electric and related services, this might translate to “Not all service is the same”. Questions arise for gas/electric market participants related to conditions of delivery, delivery point, term, price and regulatory constraints. A sample of these questions include
For the wholesale (LDC) and power industry utility customer:
- How can we best employ our assets in transportation, storage, capital and personnel?
For the large industrial customer:
- Given the current state of gas/electric markets, how can we achieve that optimum?
For the medium-sized gas/electric user:
- How can we benefit most with the least risk in existing deregulated gas/electric markets?
And for the smaller end-user/utility customer:
- What is the monthly cost savings from purchasing my own gas/electric supplies? What risks do I assume in participating in open access markets?
As with any customized service, a gas/electric service with specific features offers different costs, benefits and risk. Buyers must correctly identify their needs and their comfort zone and chose among available options.
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