Transcription
Emerging Market Impactson Dominion East OhioPresented to the Northern Ohio Chapter of theAssociation of Energy EngineersJanuary 22, 2014
Topics to be Covered Dominion East Ohio System and Market Merchant Function Exit Increased Focus on Pipeline Safety Utica Shale Development2
Dominion East OhioSystem and Market
DEO’s market and assets are uniqueMarket Size 1.2 million customers 300 Bcf annual consumptionExtent of Pipeline Assets 20,000 miles – Distribution1,100 miles – Trans/Storage1,000 miles – GatheringUnique Operations 50 Bcf of working storageGather 80% of Ohio gasInterconnects with sevenmajor interstate pipelines4
DEO’s market by the numbers Customer ClassResidentialCommercialIndustrialTotal# of Customers1,108,00084,0001,5001,193,0002014 data5
Ohio’s major LDCs are quite differentOhio LDCs’ Pipeline System MileageDominionEast OhioColumbiaGas of OhioDuke 74020,1375,7465,525GatheringTotal MilesSource: 2011 DOT Annual Report of Pipeline Mileage6
DEO’s industrial segment is changing14Bcf /Month12108Power GenUtica RelatedBig 3 AutoChem/RefinePrimary an-14
DEO serves a range of power generators Kent State University12 MW Cogeneration Plant Millennium Inorganic Chemicals25 MW Cogeneration Plant Troy Energy600 MW Peaking Plant AMP/Fremont Energy Center700 MW Combined Cycle Plant8
DEO assets overlay the Utica Shale9
Merchant Function Exit
All of DEO’s customers now get their gassupply from an Energy Marketer1970sTransportation of Ohio Production1980sInterstate TransportationBasic Gas Pooling Service1990sExpanded Gas Pooling Service OptionsEnergy Choice Pilot ProgramDEO’s role is todeliver the gassupplied by themarketer to theend user !2000sEnergy Choice System-Wide ExpansionMerchant Function Exit11
DEO’s storage plays a vital role Storage is used for severalpurposes:1.Storage service sold tomarketers and end users2.Operational balancingcapacity (on-system andcontracted Operational balancing is usedto accommodate differencesbetween forecasted and actualusage by customers On a peak day, approximatelyhalf of DEO’s daily customerdemand can be met bywithdrawing gas from storage12
DEO Residential Rate StructureChanged in 2008 DEO’s cost to serve a residential end user is largelyindependent of the gas volume consumed DEO adopted “Straight Fixed-Variable” RateStructure for residential customers in 2008 rate case DEO charges residential customers a flat fee permonth regardless of gas used For end users – Marketer fees are still based onvolumes so your gas bill is still impacted by howmuch gas you use !13
Increased Focus OnPipeline Safety
High Profile Pipeline Safety Events HelpShape Federal Regulations Bellingham Carlsbad San Bruno Allentown Sissonville HarlemMaple Heights, Ohio200215
Olympic PipelineBellingham, Washington - June 10, 1999 16” liquids pipeline ruptured 277,200 gallons of gasolinespilled into nearby waterways Three fatalities ages 10, 10,and 18 Relief valve failed to openduring pressure surgeresulting in rupture of pipeline Investigation also identifiedtraining and latent damage tothe pipeline as causes16
El Paso PipelineCarlsbad, New Mexico – August 19, 2000 30 inch natural gaspipeline ruptured nearthe Pecos river 12 fatalities – nearbycampers Pipeline failed due tointernal corrosion Over 300 million insystem improvementsresulted17
Incidents Lead to New FederalPipeline Safety Regulations Subpart “O” was added to 49CFR part 192 in2003 Goal: Prevent Transmission Pipe Failure Requires operators to risk rank pipelines andidentify “High Consequence Areas” (HCA) List of potential integrity threats must beindentified for each pipeline Based on identified threats “IntegrityAssessment” must be periodically conductedwithin all HCA’s18
New Federal Pipeline Safety Regulationsfor Distribution Pipe Subpart “P” was added to 49CFR part 192 inDecember 2009 Goal: Reduce leaks and incidents onDistribution pipe – lower pressure systems Requires operators to risk rank pipe types Apply preventive and mitigative measures toreduce risk, leaks, and incidents Emphasizes “System Knowledge” – closegaps in pipeline asset data19
New Federal Pipeline SafetyRegulations for Control Rooms Section 631 was added to 49CFR part 192 inFebruary 2010 Fatigue Mitigation for Controllers Operator Qualifications for Controllers React appropriately to Abnormal Conditions Alarm Management requirements Incorporate lessons learned into operatingprocedures20
Pacific Gas & ElectricSan Bruno, California - September 9, 2010 30 inch natural gaspipeline ruptured inresidentialneighborhood 8 fatalities – 38homes destroyed Defective weldsfound near failurepoint of pipeline Integrity assessment Resultant NTSB Bulletin – Strength Testing Of Pipehad not found badwelds21
UGI UtilitiesAllentown, Pennsylvania – February 9, 2011 1928 Cast Iron mainline ruptured whileoperating at lowpressure 5 fatalities UGI to replace allcast iron main over14 years UGI to replace baresteel main over 30yearsResultant PHMSA Emphasis on Replacement ofCast Iron Main22
Columbia Gas TransmissionSissonville, West Virginia – December 11, 2012 20” pipelinerupture due toundetectedexternalcorrosion Not in a HCA andtherefore nointegrityassessment No fatalities, noserious injuries, 3homes destroyedNTSB Recommends: RedefineHCA’s to include pipelines nearhighways, more remotely operatedvalves23
Consolidated EdisonHarlem, New York – March 2014 8 fatalities – two 5story apartmentbuildings destroyed 8 inch cast iron gasmain installed 1887 Water main leakfound nearby Con Ed increasingleak patrol frequencyConEd now shows locations of active gasleaks on the internet NYFD now respondsto all gas odor calls24
The Pipeline Safety Trend is ImprovingSource: PHMSA Serious Pipeline Incident Data25
Fatalities From Pipeline IncidentsAre DecliningSource: PHMSA26
Even More New Federal RegulationsAre Expected MAOP verification and strength testing Possible modifications to High ConsequenceArea Definition – more lines to be “assessed” Increased use of automated shut off valves toreduce time for gas shut down afterTransmission line failure Increased use of automated shut off valveson service lines to buildings Increased Gathering line regulations ?27
In 2008, DEO began its PipelineInfrastructure Replacement (PIR) program In DEO’s 2008 Rate Case the PUCO approved a program tosupport the replacement of older, more maintenance prone,pipelines 25 years, 2.7 billion(*) program to replace over 5000 milesof bare steel, cast and wrought iron, and copper pipelineDEO will replace about 25% of its pipeline through thisprogramPre1909Decade Installed(*)7%1910- 1920- 1930- 1940- 1950- 19601919 1929 1939 1949 1959 19695%17%2007 dollars288%24%39%1%
PIR Program StatusMileage and Service Lines ReplacedCumulativeThrough 2013Miles ReplacedRemaining*8354585Transmission350High Pressure Distribution54102Other Distribution7464483Bare Steel6224159Ineffectively Coated Steel17935472526471092,687*June 30, 2014Cast IronWrought IronCopperCustomer Service Lines Replaced
Program Status (Continued)PIR Investments and Cost Recovery RatesGross Investments2013Cumulative 163.6 million 674.3 million(*)Property Taxes GeneratedRate Schedule 41.8 millionEffective 5/6/2014General Sales Service andEnergy Choice Transportation Service 5.44 per MonthLarge Volume General Sales Service andLarge Volumes Energy Choice Transportation Service 42.39 per MonthGeneral Transportation Service andTransportation Service for Schools 186.31 per MonthDaily Transportation Service(*)Equals 63% of Net Plant in DEO’s last rate case 0.0469 per MCF,Up to 1,000 per Month
The PIR program is improving pipelinesafety at Dominion East Ohio DEO finds 45% fewer underground gas leakssince the PIR program began late in 2008 The trend in gas leaks found has beenreversed and is now decreasing instead ofincreasing31
Utica Shale Development
Shale gas production has reshaped theU.S. natural gas market33
What makes shale gas so attractive? “Dry” natural gas is mostly comprised of Methane or C1 ( 88%) Ethane or C2 ( 12%) “Wet” natural gas replaces some of the methane with Propane (C3) Butane (C4) Natural gasoline (C5) By processing the gas, the C2 – C5 byproducts can be removedand sold separately at a value greater than the value of the drygas by itself34
Dry shale gas production has growndramatically over the past few years35
Utica Gas ProductionProjected through February 2015Source : EIA Utica Drilling Productivity Report January 201536
DEO AssetsOverlay the UticaShale Play InOhio37
Western Access IProject Overview:DEO’s TPL-15DTIHarlem Springs& Carroll StationInterconnectsMarkWestCadiz PlantANRMullet InterconnectSwitzerland StationTexas EasternRockies Express Helping get Ohio Utica Shale production to market 320,000 dth/d volume 10,650 HP compression at new Switzerland station 6 miles of 24-inch pipeline near Harlem SpringsSafety: Zero Dominion injuries, 1 Contractor InjuryOn Time, On Budget: Switzerland – In Service October 1, 2014 Carroll Station Plan In-Service November 1, 2014 Board Approved: 91 MMConstruction Overview: Construction was on time and on budgetDTISwitzerland Compressor Station38
Western Access IIProject OverviewWestern Access IIOHIOSummaryDEO TPL15Western AccessII350,000 dt/dWestern AccessI320,000 dt/d- Capacity:*150,000 dt/d to DTI;* 200,000 dt/day to Tennessee GasPipeline (TGP)HarlemSprings- CapEx: 129.1M- In-Service: November 1, 2015- Receipt: MarkWest Cadiz processing plant(Harrison County, OH)MulletLebanonMarkWest Cadiz PlantCapacity:325,000 dt/d (current)525,000 dt/d (Q1 2015)- Delivery: New Interconnects with DTI’s TL-400and TGPFacilities- 14 mile 36” Pipeline Lateral from MW Cadiz to DTI- 3 mile 36” Pipeline Lateral from DTI to TGP- New M&R Stations39
Marcellus and Utica Impacts onRegional PricesBasis Differential to Nymex FS 0.60 0.40 0.20 0.00200420052006200720082009201020112012- 0.20- 0.40- 0.60- 0.80- 1.00- 1.20- 1.40Columbia Gas Transmission Co.40Dominion Transmission Inc.20132014
Monthly Bills for DEO ResidentialCustomers have Declined Since 2007 Customers used about 6% more gas in 2014 than in 2007 The cost impact due to increased consumption, the 2008 DEOrate case, and the PIR program cost has been more than offsetby the reduction in commodity costs Customers paid 213 LESS for natural gas service in 2014than they did in 2007 If customers had used the same gas volume in 2007 as theydid in 2014 – the savings would have been 29441
What were the key points? DEO’s system is unique and provides substantialsupply flexibility for customers DEO’s market has changed significantly and willcontinue to change in the years ahead DEO is making substantial capital investments whichhave improved the safety and reliability of its system Utica development will play a major role in economicdevelopment & maintaining low gas prices42
Ohio's major LDCs are quite different Dominion East Ohio Columbia Gas of Ohio Duke Energy Ohio Vectren Energy Delivery Distribution 19,679 20,002 5,536 5,256 Transmission 1,104 135 210 269 Gathering 957 00 0 Total Miles 21,740 20,137 5,746 5,525 Source: 2011 DOT Annual Report of Pipeline Mileage Ohio LDCs' Pipeline System Mileage 6
