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Seasonal Firm Gas Peaking Proposal May 2015 Markets Committee

This proposal aims to address the challenges faced with the existing Winter Reliability LNG program and suggests a new approach for a Seasonal Firm Gas Peaking Service. The proposal takes into consideration the need for reliability and price management during the winter season, the availability of LNG in international markets, and the inclusion of other gas supply options. It highlights the importance of firm delivered gas, whether sourced from LNG or other sources, and suggests compensation based on the cost of the product rather than unused inventory. The proposal also emphasizes the need for a demonstration of feasible and secured firm delivery and the implementation of rigorous contractual requirements.

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Seasonal Firm Gas Peaking Proposal May 2015 Markets Committee

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  1. Seasonal Firm Gas Peaking Proposal May 2015 Markets Committee

  2. LNG sendout was a critical element in helping maintain reliability and manage winter price volatility Higher-than-average LNG availability driven by a variety of international market dynamics, which may or may not persist Insignificant participation in existing Winter Reliability LNG program Observations from Winter 14/15

  3. Fails to recognize the take-or-pay nature of seasonal LNG deal structures Compensation based on unused inventory is not workable Fails to reflect embedded pipeline transportation component Fails to include other gas supply options Firm delivered gas can be an equivalent product whether it’s from LNG or other sources Problems with existing construct

  4. Product should be characterized as a Firm Delivered Natural Gas Peaking Service, not limited exclusively to LNG Compensation based on cost of the product rather than unused inventory Demonstration that firm delivery is feasible and secured from source to load on timely basis (probably linked to gas day nomination cycles) Appropriately rigorous contractual requirements to ensure performance Discussion items for proposed construct

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