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Natural Gas Forecast

Natural Gas Forecast. Objectives of natural gas commodity model. To produce a 20-year avoided cost forecast for gas delivered for core customers To produce a 20-year avoided cost forecast for gas delivered for electricity generation Natural gas T&D avoided costs estimated as part of T&D model.

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Natural Gas Forecast

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  1. Natural Gas Forecast

  2. Objectives of natural gas commodity model • To produce a 20-year avoided cost forecast for gas delivered for core customers • To produce a 20-year avoided cost forecast for gas delivered for electricity generation • Natural gas T&D avoided costs estimated as part of T&D model

  3. E3 methodology for forecasting gas commodity cost at city gate • Use market data where available: NYMEX futures prices available for 72 months • Adjust for location using NYMEX OTC basis swap prices where available (up to 36 months), econometric analysis for subsequent period • Transition to CEC forecast for long term

  4. NYMEX Natural Gas Futures • Delivery Location: Henry Hub (Louisiana) • “Open Interest” settled daily based on mark-to-market • Trading stats from 9/15 session, Oct. delivery: • Volume: 273 TBtu ($1.3 billion) • Open Interest: 514 TBtu ($2.4 billion) • Daily trading volumes drop off after 1 year out, Open Interest after ~3 years out

  5. Basis Difference Analysis • 1996-2003 average, excluding crisis period (6/00-7/01): • SoCal Gas: -6¢ • PG&E: +2¢ • Forward swap prices less than 20¢ & trending towards zero • Econometric analysis finds no persistent basis differential • Assume zero for out years

  6. Long-term natural gas commodity price forecast

  7. PG&E Tariff Title Rate ($/therm) Name G - EG: Gas Transportation Service to $0.0246 Electric Generation G - SUR: Customer - Procured Gas Franchise $0.007 8 Fee Surcha rge Total $0.0324 SoCal Gas Tariff Title Rate ($/therm) Name G T - F 5 : Electric Generation customers using $0.02 70 3 million therms or more per yea r G - SUR: Customer - Procured Gas Franchise $0.00 47 Fee Surcharge Total $0.03 17 Local distribution system avoided cost adders • For electric generators, add tariff rate for transportation across intrastate LDC systems • For LDCs, add avoidable localdistribution upgrade costs

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