PECO Gas Supply Winter Planning. Page 1

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1 PECO Gas Supply Winter Planning Page 1

2 Topics PECO s Winter Supply Planning Supply Portfolio Winter Pricing Predictions Supply Picture Capacity Availability Damage Prevention Page 2

3 PECO s s Winter Gas Supply Planning PECO s plans for firm supply to meet firm customer demand during a design winter (10% colder than normal) and a peak design day (zero degrees for 24 hour gas day) 640 large C&I customers participating in its high volume transportation program Approximately 1/3 of total annual throughput supplied by third party marketers Not considered in PECO s supply planning other than firm Standby Sales Service PECO purchases approximately 61 Bcf of natural gas annually Approximately 47 Bcf for a normal winter Annual gas costs between $500 and $600 Million Page 3

4 Winter Weather Predictions and Supply Planning? Bottom Line. Supply planning based on 30 years of historical degree days and usage NOT future weather predictions In the first scheduled update to the U.S. winter outlook, NOAA seasonal forecasters say the latest data and model runs confirm their earlier prediction for above-average temperatures over most of the country NOAA 10/18/07 Look for this winter to be coldest since seasonal to below normal temperatures are seen across the.... Northeast. Restructuring Today November 2, 2007 The extended winter forecast for the months of November through March calls for a cooler than normal start and end but the traditional winter months, December through February, may be one of the top 10 warmest winters ever for the southeastern United States AccuWeather October 22, 2007 It is important to note that a warmer than normal winter does not mean above average temperatures for five straight months. Even in the warmest winter seasons, four weeks of very cold temperatures still occur. Sempra Energy Trading Page 4

5 PECO s s Winter Gas Supply Portfolio Main Tiers to Winter Supply Portfolio: Long-haul pipeline transportation capacity Supply contracts from 3 rd party marketers Flow to our gate primarily through Transcontinental and Texas Eastern Pipeline Storage Services 22.8 Bcf 8 Storage Services on 6 pipelines Transco, Tetco, Panhandle, Dominion, Eastern Shore, Equitrans Peaking Assets On site 1.2 Bcf LNG tank and Propane Air Peaking Facility Contracts with 3 rd party marketers delivered to PECO s citygate Page 5

6 Gas Price Hedging Program "Non-hedged flowing" 50% "Normal Winter" Supply (48.2 Mdth) LNG 1% Propane 0% Storage 33% "Hedged Flowing" 16% Approximately 50% of our normal winter supplies are price hedged, and the remaining half are subject to that winter s market conditions. Page 6

7 PECO s s Winter Gas Supply Portfolio ,000 Design Day Peak Load of 806,197 Dth 800, , , , , , , , ,710 25, , , ,332 70, % 3 % 34% 15% 19% 9% LNG Propane Storage TETCO Flowing Transco Flowing Delivered Service Total Flowing Supply = 34 % Total Flowing Storage = 34 % Total Peaking Services = 32 %, include our peaking assets and Delivered Services Page 7

8 Winter Price Predictions? All Heating Fuel Prices Expected to Be Up This Winter In the Northeast Region. Oil projected to increase 22% Propane to increase 16% Natural Gas to increase 8% Henry Hub Spot price projected to reach a winter peak monthly average of $8.65 per Mcf in January 2008 Averaged $6.95 in October as comparison On annual basis, spot prices for 2008 are expected to be more than $.70 higher than 2007 Record storage levels and limited fuel switching capability have mitigated the impact of the recent price increases in petroleum markets on natural gas prices Page 8

9 Winter Price Predictions? Page 9

10 Gas Consumption Still Increasing Page 10

11 Supply Picture Looks Good STORAGE Storage levels reached a record 3.51 Trillion cubic feet (Tcf) as of October 26 th DOMESTIC PRODUCTION INCREASING Total U.S. production is expected to rise 1.4% in 07 and 1.3% in 2008 Ongoing efforts to develop unconventional reserves are expected to increase onshore production Production in Gulf is declining but development of deepwater supply sources is expected to lead to production growth of 7.4% in 2008 LNG Slowing but still expecting future increase of imports Imports have slowed substantially since earlier this year Strong demand in other parts increases prices diverts cargos Despite current reduction, still predicting increase by 39% in 2007 and by 24% in 2008 as global liquefaction capacity continues to increase Page 11

12 Supply Picture LNG Cont Approximately 40 LNG terminals before FERC or being discussed Six terminals operating on the East Coast, Puerto Rico and Alaska Market ultimately determines what gets built Industry analysts predict that only 12 of the 40 will be built Page 12

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14 Capacity Expansion Projects Everyone Wants that Inexpensive Rockies Gas: Competing NE Pipeline Projects to get Rockies Gas to the Market Tetco Northern Bridge MMcf/d Williams Rockies Connector 700 MMcf/d Tennessee Northeast Passage 1,110 MMcf/d Kinder Morgan Clarington-Princeton Line TBD Tetco Time III TBD Sempra Energy REX Northeast Express 1,000 MMcf/d Tetco Steckman Ridge Storage Project TBD Page 14

15 Damage Prevention Damage Prevention Number of Tickets Damge Rate (Hits/Thousand Tickets) * Year 0 Number of Tickets Rate Page 15

16 Damage Prevention Increasing Ticket Volume Demand for New Fiber Optic Service Increased Awareness of PA One Call (811) Contractor Outreach Bill Stuffers Decreasing Damage Rates Better Facility Locating Equipment Ground Penetrating Radar Vacuum Truck Working Closely with Verizon on FTTP/FIOS Project Regular Meetings Escalation Path Established Page 16