PREPARED DIRECT TESTIMONY OF BRUCE D. HEINE ON BEHALF OF NATIONAL FUEL GAS DISTRIBUTION CORPORATION PENNSYLVANIA DIVISION

Transcription

1 PREPARED DIRECT TESTIMONY OF BRUCE D. HEINE ON BEHALF OF NATIONAL FUEL GAS DISTRIBUTION CORPORATION PENNSYLVANIA DIVISION NATURAL GAS CHOICE AND COMPETITION ACT FILING DOCKET NO. R-00 RESTRUCTURING FILING October,

2 0 0 Q. State your name and business address. A. My name is Bruce D. Heine and my business address is 0 Lafayette Square, Buffalo, New York 0. Q. By whom are you employed and in what capacity? A. I am employed by National Fuel Gas Distribution Corporation ("Distribution" or the Company )) as General Manager of Gas Supply Administration. Q. Summarize your educational background and experience. A. I received a Bachelor of Science degree in Civil Engineering from the State University of New York at Buffalo in. I am a member of the National Energy Services Association and the Independent Oil and Gas Association of New York. In, I joined Distribution as a Management Trainee. In, I was promoted to Junior Engineer in the Engineering Department. In, I was appointed to the Construction Department at the Tonawanda Service Center. In November of I was transferred from Distribution to National Fuel Supply Corporation ("Supply") and was promoted to Manager of Gas Procurement in the Contract Administration Department. In July, I was transferred to Supply's Houston,

3 0 0 Texas office as Manager of Gas Procurement. In June, I returned to Buffalo, New York and was promoted to Assistant General Manager in the Contract Administration Department. In March,, I was promoted to General Manager of Contract Administration. On August,, I was transferred from Supply to Distribution and obtained my current position of General Manager of Distribution's Gas Supply Administration Department. My current responsibilities include the supervision and responsibility of the Gas Supply Administration Department personnel. I assist the Senior Vice President in developing and implementing the Company s procurement policies and I develop the strategy to implement such policy decisions. I oversee the direction of Distribution's Gas Procurement, Gas Accounting and Transportation and Exchange divisions of the Gas Supply Administration Department. Finally, I have been responsible for the preparation of the gas procurement portions of the purchase gas cost filing under Section 0(f) since.

4 Q. Which filing requirements under the Natural Gas Choice and Competition Act ( Act ) were prepared by you or under your supervision? A. I was responsible for the preparation of the following filing requirements: 0 B.. C.. C..a. C..b. C..d. C..e. C.. C.. Supplier of Last Resort Safety and Reliability Safety and Reliability Assigning Capacity New and Renewed Capacity Capacity Contract Mitigation Balancing Pennsylvania Producer Contracts 0 H. Collaborative Process These deal mainly with allocation of upstream pipeline capacity and the continued safety and reliability of natural gas supply and distribution service to retail gas customers. Q. Is the information in these exhibits true and correct to the best of your knowledge, information and belief? A. Yes.

5 0 0 Q. How does Distribution propose to handle the Supplier of Last Resort ( SOLR ) responsibility? A. As in its current customer choice program, Distribution intends to continue its role as the SOLR. This is further discussed in Exhibit, Schedule B.. To continue this role Distribution proposes to continue to retain the right to recall capacity and obtain gas in storage from suppliers whose customers return to the Company. Q. In Distribution s current system-wide natural gas supplier choice program which became effective on March,, what provisions ensure the continued safety and reliability of the natural gas supply and distribution service? A. Many of the provisions are explained in Exhibit, Schedules C.. and C.. and further in Exhibit which contains the filing Distribution originally made before the Commission regarding Distribution s system-wide customer choice program. The major factor which ensures the continued safety and reliability of service on the National Fuel Gas system are the upstream capacity requirements. Distribution will continue to

6 0 0 retain capacity critical to the operations of the system, as well as require release of transportation capacity and storage on a mandatory basis so that Natural Gas Suppliers ( NGS or Suppliers ) have access to the assets necessary to provide deliveries to the system with comparable reliability to that historically provided by Distribution. Q. Is Distribution proposing any revisions to its current program to ensure safety and reliability as part of its restructuring filing? A. Yes, as discussed in the testimony of Eric H. Meinl, Distribution has modified the amount of capacity retained by Distribution in order to meet customer daily requirements associated with the difference between forecasted requirements reflected in the Aggregated Daily Delivery Quantity ( ADDQ ) and the actual requirements experienced on the system. As well, this capacity will provide the means to provide deliverability on peak days and to serve customers whose Suppliers have failed to deliver. Q. How do these modifications impact the safety and reliability of the system?

7 0 0 A. Each day Suppliers under the Rate Schedule Small Aggregation Transportation Supplier Service ( SATS Service )receive an ADDQ for their respective customer groups. Suppliers are required to deliver to Distribution s city gate each day a quantity of gas equivalent to their customers ADDQ. The ADDQ is calculated using forecasted weather information so it will not be exactly equivalent to the Suppliers customer groups actual usage, since weather changes and other factors will cause a variance. For this reason, in order to ensure that the proper amount of gas is delivered to the system each day and to preserve safety and reliability of the system, it is necessary for Distribution to retain a portion of its no-notice service on Supply (storage and associated transportation) to balance the difference between the Suppliers city gate deliveries and the actual requirements on the system. This concept is explained in more detail in Exhibit, Schedule C.. Q. What are the other assets Distribution proposes to retain to further assure peak day deliveries and security for non deliveries?

8 0 0 A. Distribution will retain.0 Bcf of capacity on its 0- day storage contract with Engage and. Bcf of capacity on its 0-day storage contract with Columbia as described in Exhibit, Schedule C.. This capacity will be retained to meet the requirements on the system during extreme days as well as to provide backup deliverability to the system when Suppliers fail to deliver. It will be very important for Distribution to control storage deliveries associated with extreme peak days so that the system can handle operational requirements efficiently such as extreme peak hourly demand. Q. If the Company retains this storage capacity, will Suppliers need to find additional capacity to meet their peak-day obligations? A. No, Suppliers will be assigned capacity and storage pursuant to Rate Schedule SATS, Special Provisions, Section C and as described in Exhibit, Schedule C.. This capacity allocation will provide Suppliers sufficient deliverability to meet a Degree Day day. Suppliers will never be issued an ADDQ based on weather conditions above a Degree Day day. The

9 0 0 deliverability required to meet the requirements above a Degree Day day will be provided by the Company using the retained storage. Q. Will this retained storage provide all the necessary backup deliverability if Suppliers fail to deliver? A. By retaining the proposed level of storage in this filing, Distribution will be able to provide a level of backup deliverability on days that are warmer than a Degree Day day. For days colder than a Degree Day day the level of backup deliverability available declines as the days get colder and becomes 0 at a Degree Day day. This is because the deliverability associated with the retained capacity will be used to meet the requirements of the SATS Supplier s customer groups on those days. In order to assure that reliability of gas deliveries on the system is maintained in the future as more and more customers switch to SATC service, it will be necessary to contract for additional backup deliverability to cover Suppliers on extreme days colder than Degree Days. The Company is currently evaluating 0-day storage service options which could

10 0 0 provide the deliverability to backup 0% of the Suppliers extreme-day market. Q. How does Distribution propose to handle capacity decisions for the future? A. Distribution, as part of its current customer choice program, has developed procedures by which it advises Suppliers operating on its system of capacity to be renewed or obtained prior to any notice dates in the contract or other such dates critical to obtaining such capacity. Distribution, as part of this restructuring filing, has formalized these procedures and they will apply following the grace period set out in the Act. Specifically, dates are set out to allow sufficient time for decision making prior to contract notice dates or other critical dates. These procedures are included in Exhibit, Schedule C.. d. The material portions of these procedures are also included in the proposed SATS Tariff at page AL, in Exhibit. Q. How does Distribution plan to mitigate its capacity costs? A. Distribution plans to continue to manage its current capacity in a least cost manner. Distribution

11 however, for the longer term, will use those procedures identified above to address capacity needs on the system. This will assure it contracts for the capacity that it must. To the extent Suppliers seek to provide capacity which is comparable they will be allowed to do so. Q. Does this conclude your testimony? A. Yes it does. 0

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