Natural Gas - Glossary
A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z
B
Balancing
The process of adjusting physical gas deliveries to match what should have been taken or delivered. This is done by making deliveries or withdrawals of gas from the pipeline and it may be done daily, monthly, or seasonally, depending on whether the pipeline is an interstate system regulated by the FERC, or an intrastate system.
Balancing Penalty
Scheduling and imbalance charges, penalties, fees or cash outs contained in a transporter’s tariff, which may be assessed against a shipper for failure to satisfy the transporter’s balance, nominations, or scheduling requirements.
BTU (British Thermal Unit)
The amount of heat required to raise one pound of water one degree Fahrenheit. MMBTU is one million BTU’s. This is the measurement of quantity in natural gas contracts.
C
City Gate
The physical location where a local distribution company measures and receives gas from an upstream pipeline company.
Commodity Charge
Charges for sales or transportation service based on the volume actually transported or the quantity actually purchased.
Tip: Make sure your price quote includes this charge or ask for a break-out.
D
Daily Transportation Quantity
The average amount of natural gas that your local gas utility estimates a customer served under balancing service will use each day of a calendar month.
Decatherm ( Dth)
A metric unit of heat measurement which equals 10 therms. This is a unit of heat equal to 1 MMBtu.
Delivery Point
The physical point at which gas is delivered by the seller to the buyer. These “points” are more difficult to determine when pooled gas is sold or purchased.
E
Evergreen Clause
A contract provision that extends the term of the contract beyond the primary expiration date. There is usually a month-to-month or year-to-year extension and can be triggered either by affirmative action by one of the parties or by inaction of both of the parties, depending on the contract language; also called a “Rollover” Clause.
Tip: In many cases your contract is automatically renewed unless you specify otherwise.
F
Firm Delivery
A term used in sales of gas to denote an absolute obligation on the seller to deliver gas and the same obligation on the buyer to accept delivery of an agreed-to quantity of product.
Force-Majeure
From the French, now commonly known in the natural gas sales transactions as an unforeseen occurrence beyond the control of the parties (acts of God, strikes, war, etc) to a contract which partially or entirely prevents the performance of one or both parties. Gas sale contracts usually contain a force majeure clause that may list specific instances and specific exclusions from force majeure. Transportation service agreements also contain these clauses.
Tip: This may occur, for example, during a hurricane in Florida or the Gulf of Mexico.
Fuel
Gas consumed by a gathering system, processing plant or pipeline as fuel to run the facility. Fuel costs may or may not be included in the cost of transportation in gas sale contracts.
Tip: Make sure this charge is included in the price you have been quoted or ask for it to be quoted so you understand your total cost.
I
Index price
A price usually obtained from an industry publication which is intended to represent an average price of gas delivered to a specific point on the pipeline at or during a specified period of time. Examples of indices utilized in natural gas sales are: “Gas Daily FGT City Gates”, NYMEX, and Inside FERC FGT Zone 3.
Interruptible Customer
A customer receiving service under a contract which permits the interruption of service on short notice due to insufficient gas supply or capacity to deliver the supply.
Interruptible Service
Natural gas transportation service that receives the lowest priority. A pipeline may and allow interruption on short notice, generally in peak-load times, for any reason listed in its transportation tariff.
L
Local Distribution Company (LDC)
A local utility that sells natural gas to consumers within the city or region that the utility servers. LDC’s are usually regulated at the state level.
Tip: In Florida, LDC’s include TECO People’s Gas, Florida City Gas Florida Public Utilities, among others.
M
Marketer
A company involved in the business of purchasing and reselling natural gas. The company may be independent or affiliated with the transmission, production or LDC companies. Also called a Broker or Supplier.
Tip: FPL Energy Services is an example.
N
New York Mercantile Exchange (NYMEX)
The first U.S. exchange to trade natural gas futures contracts and has contracts with Henry Hub, Permian, and Canadian delivery.
Tip: NYMEX contracts are sometimes used as an index for pricing natural gas.
Nomination
A request for a physical quantity of gas under a specific purchase or transportation agreement.
O
Offshore Gas
Natural gas found underneath coastal bodies of water outside the required 3 mile limit.
Onshore Gas
Natural gas found underground. Gas produced in water offshore, but within the 3 mile limit is referred to as onshore gas.
P
Peak Day
The day when the highest delivery requirement during a 24-hour period (8 a.m. to 8p.m.) is placed upon a pipeline system by customer usage.
Peak Demand
The highest demand that a natural gas supplier with flexible demand must meet.
PGA (Purchased Gas Adjustment)
Is the local distribution company’s monthly gas commodity charge. Typically this charge varies from month to month based on the LDC’s cost of purchased gas.
R
Reserves
Volume of natural gas in the earth, available for production.
S
Scheduling
The process that consolidates nominations by receipt point, by contract quantity and then notifies the transporters.
Scheduling Penalty
Penalty imposed by pipeline’s for the difference between the amount of natural gas scheduled to flow and the amount that actually flowed.
Shipper
The party who contracts with a pipeline for transportation service. A shipper has the obligation to confirm that the volume of gas delivered to the transporter is consistent with nominations. The shipper is obligated to confirm that differences between the volume delivered to the pipeline and the volume delivered by the pipeline back to the shipper is brought into balance as quickly as possible.
Spot Market
A generic reference to short-term purchases and sales of natural gas. Spot market prices are reported by pipelines for various areas by index publications.
Strip
“12-Month Strip" is an average of natural gas futures prices for a specified 12 month period, based on natural gas futures contracts traded on the New York Mercantile Exchange (NYMEX). Strips may also be purchased for shorter or longer periods.
Tip: When considering the purchase of a fixed price contract, work with your marketer to determine, based upon your needs and market conditions, the appropriate strip length.
T
Take or Pay Clause
A provision in natural gas sale contracts which requires a purchaser to pay for a certain quantity of gas whether it is taken or not. These clauses are no longer commonly used
Therm
A metric unit of measurement, which is equal to one hundred thousand BTU.
Transportation Costs
The costs associated with the movement of natural gas from one point to another. In addition to the transmission rate, these costs may include gathering rates, fuel and applicable surcharges as set out in the FERC-approved tariff of the transporting pipeline.
Trigger Price
A pricing option in some gas sale contracts which allows one party to price the gas at the exchange-related pricing at the time of their choice.
W
WACOG
Weighted average cost of gas purchased during a given period of time, typically a month.
Z
Zone
A way pipeline companies differentiate between different areas on their pipeline systems. Each pipeline system has a field zone and a market zone. Gas may be delivered into the pipeline’s field zone and taken out of the system in market zones. Transportation rates on a single transportation system may vary from zone to zone if the pipeline uses a zone based rate structure.
Tip: FGT Zone 3 is closer to the Florida market area and therefore much of the gas serving Florida is bought out of Zone 3.
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