2016 GMA Annual Convention

Transcription

1 2016 GMA Annual Convention Gas 101 PROMOTING EXCELLENCE IN GOVERNMENT

2 Municipal Gas 101 Mike Jewell Chairman, GMA Gas Section City of Lawrenceville

3 Municipal Gas 101 The Natural Gas Industry A Brief Survey Chris Strippelhoff Chief Membership Officer Municipal Gas Authority of Georgia cstrippelhoff@gasauthority.com

4 Today s Agenda Natural Gas is A Segmented Industry An Historical Survey The Natural Gas Picture in Georgia A Golden Age A Golden Opportunity Four Key Takeaways

5 Natural Gas is A naturally occurring hydrocarbon gas consisting primarily of methane (CH 4 ) Colorless, odorless and lighter than air (0.6 SG) Odorant added for easy detection Safe Too lean to burn at less than ~4% gas-in-air Too rich to burn at more than ~14% gas-in-air Requires ignition spark of 900 1,170 0 F Cleanest-burning fossil fuel 100% produced in North America 25% of the energy used in the U.S.

6 A Segmented Industry Three Distinct Industry Segments Collectively Serve Consumers Residential Producers Majors (ExxonMobil, BP, Chevron, Shell, Conoco/Phillips, etc.) Independents (over 1,000) Produce 82% US gas and 68% of US oil Pipelines 12 Major Interstate Pipelines Federal Energy Regulatory Commission (FERC) Regulated Local Distribution Company (LDC s) Investor-Owned Utilities Public Gas Systems State Regulation Commercial Industrial/Power Generation

7 An Historical Survey 1930's 1950's 1970's / Rapid growth in demand, regulated wellhead prices Municipal Systems Built in Southeast Created Shortages (Price Included) Natural Gas Policy of 1978 Gas Bubble (Price/ Recession Induced) HISTORIC OVERVIEW: Evolution from regulated prices in all segments to market-based pricing for the commodity FERC #436 FERC #636 Created LDC AGL- Restructuring Complete ( unbundling ) Unbundling & Deregulated Gas Supply Forecast show LNG Imports required to balance market PSC Involvement Increases Significantly Shale Gas Revolution Begins

8 Market-Driven Commodity $ NYMEX Natural Gas Price per million Btu ($/MMBtu) $ $ $ $8.000 $6.000 $4.000 $2.000 $0.000 Nymex Historic Settlements Nymex Forward Curve Nymex Current Forward Curve

9 Cost Components Industry Segments Relative Cost of Delivered Service Residential/Commercial Industrial 25% 8% 17% 15% 60% 75% Producer Pipeline LDC Producer Pipeline LDC

10 The Natural Gas Picture in Georgia Municipally Owned 84 Public Gas Systems <100 to 55,000+ customers Investor Owned 2 IOU Systems 1.6 million customers New on the scene The Natural Gas Association of Georgia A Consumer Facing Entity for all natural gas concerns in the state

11 The Golden Age of Natural Gas

12 Four Key Takeaways 1. Abundant, Low Cost, Domestic Energy Resource 2. Cleanest Burning Fossil Fuel 3. Most Efficient Fuel For Thermal Applications 4. Solid Business Opportunity for Municipal Gas Systems

13 2016 GMA Summer Meeting June 27, 2016 Presented by the Georgia Public Service Commission Michelle Thebert, Director Facilities Protection Alan Towe, Senior Safety Inspector

14 Municipal Gas 101 Maximizing the Value of the Gas Utility Enterprise A Business Model Approach Rodney Dill Director, Member Services & Communications Municipal Gas Authority of Georgia rdill@gasauthority.com

15 Margin Generating Public Enterprises Exist to Provide Public Benefit and Support the Local Community A municipal gas system is an enterprise activity Municipal enterprise funds have three broad purposes 1- Necessary enterprises (private sector alternative does not exist) 2- Quality of life enterprises (not as essential; improves community life) 3- Margin-generating enterprises (private sector alternative does exist) General Purpose of Enterprise Activities

16 Business Model Approach 9 Essential Business Model Elements Customer Segments For whom are we creating value? Who are our most important customers? Value Propositions What value do we deliver to the customer? Which one of our customer s problems are we helping to solve? Why do customers buy-use our product?

17 Business Model Approach 9 Essential Business Model Elements Channels How are these propositions promoted? How do customers get access to our product? Customer Relationships How do we interact with customers? What kind of interaction is needed or preferred? How costly are the interactions? Revenue Streams How does the business (enterprise) earn revenue from the Value Propositions? What is the revenue requirement for the enterprise?

18 Business Model Approach 9 Essential Business Model Elements Key Resources What unique strategic assets must the enterprise have to compete? What resources do our Channels and Customer Relationships require? Key Activities What strategic things does the enterprise do to deliver its Value Proposition? What activities do our Channels and Customer Relationships require?

19 Business Model Approach 9 Essential Business Model Elements Key Partnerships Who are our Key Partners? What can the enterprise not do so it can focus on Key Activities? Cost Structure What are the critical costs inherent in our business model? What are the enterprises major cost drivers? How are costs linked to revenue?

20 Business Model Canvas Municipal Gas System (Sample Mapping)

21 Business Model Canvas Municipal Gas System (Sample Mapping)

22 Business Model Approach Why a Business Model Approach? Optimize the public benefit of the gas distribution system Support the goals of local government Natural gas entering a sustainable growth period There are more than 72 million natural gas customers in the United States The U.S. estimated future supply of natural gas stands at over 3,000 Trillion CF

23 Golden Age of Natural Gas Serving 66 million homes, 5 million business, 195,000 industrial plants, 1,900 electric generating units, emerging transportation market Comprises 25% of all primary energy used in the U.S., employing nearly 3 million Americans On average, households in Georgia that use natural gas for space & water heating save between $500-$700 a year compared to electric Natural gas is delivered to the customer at 92% efficiency, compared to 27% for electricity efficiency and emission advantages The average American home consumes 40% less natural gas than it did 40 years ago efficiency through research and development Natural gas utilities have installed updated plastic lines at a rate of 30,000 miles per year (technology) Natural gas utilities spend more than $19 billion annually to help enhance the safety of natural gas distribution and transmission systems

24 Complete Gas Survey Remember to Complete UGA s credit form Feel free to contact any GMA Gas Section Board Member if you have any questions. Contact information can be found at Thanks for attending Municipal Gas 101