United States Department of Transportation
i
Natural Gas Storage – End User Interaction. Final Report, September 1992–May 1996
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1998-01-01
[PDF-5.80 MB]
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Edition:Final Report September 1992 - May 1996
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Abstract:New opportunities have been created for underground gas storage as a result of recent regulatory developments in the energy industry. The Federal Energy Regulatory Commission (FERC) Order 636 changed the economics of gas storage nationwide. Pipelines have been required to "unbundle" their various services so that pipeline users can select only what they need from among the transportation, storage, balancing and the other traditional pipeline services. At the same time, the shift from Modified Fixed Variable (MFV) rate design to Straight Fixed Variable (SFV) rate design has increased the costs of pipeline capacity relative to storage and peak shaving options. Finally, the secondary market in pipeline and storage services created by Order 636 gives potential gas users more flexibility in assembling combinations of gas delivery services to create reliable gas deliverability. In response to Order 636, the last two years have seen an explosion in proposals for gas storage projects. Another major development affecting the demand for storage is the restructuring of the electric power industry. This trend began with the passage of the Public Utilities Regulatory Policies Act (PURPA) which allowed non-electric generators, or qualifying facilities, to provide electric power to electric utilities. Since 1978 substantial amounts of cogeneration and independent power capacity have come on line. Repeal of the Fuel Use Act enabled this capacity to be built with efficient gas-fired turbine technologies. The Energy Policy Act of 1992 and newly proposed FERC regulations will further the break-up of the electric power industry into independent generators and distribution utilities. The fuel of choice for most cogeneration and independent power has been, and probably will continue to be, natural gas. Since many of these units are load following units (peaking or intermediate), as opposed to base load units, they use gas unevenly over time. In regions where electric power demand is greatest in the summer for air conditioning, this uneven usage could eventually decrease the need for storage
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