The Interstate Natural Gas Association of America reports U.S. pipelines' gas sales function has nearly disappeared under the Federal Energy Regulatory Commission's Order 636.
The order required pipelines to unbundle rates, which Ingaa said "has transformed the composition of pipeline services."
Order 636 was not implemented until the last month of 1993. Ingaa surveyed pipeline carriage for the first half of 1994 as the basis for its report.
"As expected," Ingaa said, "the pipeline sales function has nearly disappeared (dwindling to 3% of gas delivered to market by mid-year 1994). No-notice service has emerged, accounting for 11% of the gas delivered for market at mid-year 1994.
"Once dominant, the use of interruptible transportation declined precipitously to 20% of gas delivered for market, the smallest share of the market that interruptible transportation has had since Ingaa began tracking it in 1986. "While interruptible transportation was declining in the first half of 1994, released firm transportation grew to 8% of gas delivered for market, and regular firm transportation increased to 58%."
NEW SERVICES
Ingaa said, "With implementation of Order 636, a new mix of services is being bought from pipelines. In the first half of 1994, the use of both interruptible transportation and pipeline sales dropped dramatically.
"The use of interruptible transportation declined from 35% of gas delivered for market in midyear 1993 to 20% for midyear 1994 (or from 3.7 to 2.1 quadrillion BTU). This level is lower than the previous low of 32% in 1986, the year Ingaa began tracking interruptible transportation."
Sales declined from 14% at midyear 1993 to 3% at midyear 1994 (from 1.4 to 0.3 quads). The study said the decline in sales is a necessary result of Order 636, and the decline in interruptible transportation is more remarkable because it is the result of market forces.
Ingaa said, "Interruptible service and sales are being replaced by volumes moving as released firm transportation, by regular firm transportation, and by no-notice firm transportation. Order 636 established the secondary market for released firm capacity.
"Transportation using released firm capacity continued to grow, as all interstate pipeline companies began to operate under Order 636. By midyear 1994, released firm comprised 8% of gas delivered for market (0.9 quads), up from 2% at yearend 1993 (0.4 quads)."
In first half 1994, regular firm transportation grew to 58% of gas delivered for market, up from 51% at midyear 1993. In volumetric terms, regular firm transportation grew to 6.3 from 5.4 quads.
No-notice firm transportation made its first appearance in the lineup of post-Order 636 services, with 11% (1.2 quads) of gas delivered for market.
Ingaa termed no-notice service a premium, flexible transportation service used by customers to recreate the level of service they formerly received within the pipeline sales service.
For many years, local distributors relied on the pipeline sales service.
Ingaa said, "It should come as no surprise that distributors are recreating their previous level of service by purchasing no-notice. Indeed, no-notice service is almost exclusively used by distributors."
DELIVERIES
Ingaa said for first half 1994, carriage for market-transportation on behalf of distributors, end users, and marketers-accounted for 97% of the total natural gas delivered for market.
This is a sharp jump from the 86% reported for mid- year 1993. Three percent of deliveries for market moved as sales gas, down from 14% at midyear 1993 and 10% at yearend 1993.
In volume terms, carriage for market grew to 10.5 quads in first half 1994, a 15% increase from the 9.1 quads transported in 1993. Pipeline sales fell 1.2 quads, representing an 80% drop, from midyear 1993 levels.
While carriage for market and sales were undergoing this dramatic swap, their combined total increased by only 2%. Total natural gas delivered for market reached 10.8 quads for midyear 1994, an increase of 2% over midyear 1993 levels.
Pipeline throughput, which includes carriage for market, carriage for other pipelines, and sales, totaled 12.1 quads in first half 1994, a 2% decline from the midyear 1993 level of 12.3 quads.
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