Is the Natural Gas Market Ready for Hourly Nominations?

Marketers, traders, and power generators would like the natural gas market to be as fluid as the electric market. Pipeline companies trying to efficiently manage their assets want to assure that if markets pull all their gas in a few hours per day, that they keep the integrity of their pipelines safe, as well as collect money from those using their pipelines in such a manner.

The problem in moving the natural gas market towards the electric market lies in the fact that electricity literally moves at the flick of a switch, while natural gas takes a bit of time to move from the producing fields to the end use markets.

Frankly, power generators don’t necessarily care what it takes to get the gas there; they just want it available when they need it. Pipelines are often more interested in selling capacity and maintaining steady throughput and linepack.

To manage this hourly, transactions will need to be scheduled on an hourly or series of hourly basis. This would result in up to twenty-four scheduling cycles in which the pipeline would need to assign capacity and make cuts each hour. Great in theory, but not realistic from a scheduling and accounting view.

The logical step is to continue scheduling under the current cycles and utilize hourly nominations for flow profile calculations so that pipelines can manage their assets – and maybe even come up with a simple billing mechanism that does not call for massive manual spreadsheets, or re-writes of existing business systems.

Until all the camps come together and put themselves in each others shoes, a solution determined by the regulatory agencies trying to mediate the selfish concerns of the different camps will result. That could lead to disastrous results – or at least leaving no one happy.

Robert Young
Product Manager – Commercial Applications