CNGs Funk said integrated energy marketers will benefit utilities as much as gas producers as competition spreads through the power industry.
For example, a utility might have plenty of high cost peaking capacity but could need an economical source of power off peak. Another utility might have plenty of base load power but come up short during periods of peak demand.
A power marketer could help both by rebundling one source of firm, economical base load supply into firm peaking services for the utility that needed peaking power and a package of low cost interruptible power for the utility that needed economic base load power.
Both utilities get the service they need at a price lower than they would have paid otherwise, Funk said. We get more for our power than either customer would have been willing to pay for it separately.
Formed in September 1994, CNG Energy Services in first half 1995 sold more than 700 million kw-hr of power, placing it fourth among U.S. independent power marketers. The unit in July and August moved another 400 million kw-hr of power, boosting total sales for the year through August to more than 1.1 billion kw-hr.
On 2 days in July, the company had 830,000 kw of power scheduled and available to customers, nearly twice the output capacity of the seven IPP facilities in which CNG has invested.
Among other top U.S. independent power marketers during first half 1995 were Louis Dreyfus Power Marketing Inc., Electric Clearinghouse Inc., North American Energy Conservation Inc., Catex Vitol Electric Inc., Louisiana Gas & Electric, AES Power Inc., Citizens Lehman Power Sales, and NorAm Energy Service Inc.
In addition, CNG has formed an alliance with Hydro Quebec, North Americas largest power producer, and Noverco, which manages 165 billion kw-hr of electric storage capacity. CNG contributed to the alliance the largest gas storage network in North America.
By substituting idle gas for hydroelectric power being used to generate electricity in a cross fuel arbitrage maneuver, the alliance could exchange a long gas position for water stored behind a dam. In such a case, partners would capture the value of the deal by releasing water from behind the dam to generate electricity.
Alliance partners could profit from the strategy either by selling the electricity later into peaking power markets or by arranging a gas trade with a power generator holding firm gas supplies.
We deliver electric power on peak and take the power generators gas to sell into peak gas markets, Funk explained.
CNG could use its IPP facilities in similar ways during idle time to generate power for other markets at very low costs.
CNG aims to develop a constant flow of new products that meet or even anticipate customers needs.
We want to be able to offer base load, swing capacity, and peaking services, Funk said of CNGs power marketing strategy. We also want to have a menu of ancillary services such as scheduling and voltage support available to mix and match.
Funk said CNGs basic philosophy is this: If a customer doesnt see a product or service that will help him, he should let company officials know.
Well be happy to whip up something new, he said, although well be a little chagrined we didnt come up with it first. Copyright 1995 Oil & Gas Journal. All Rights Reserved.
