10 Myths and Realities of Natural Gas and Electricity Purchasing
Abstract
In deregulated natural gas and electricity markets, many tradi-
tional purchasing practices brought from other businesses or even taken
from energy’s past may not serve end-users well. While there is no one
right way to manage purchases in these deregulated markets, there are
many important facts and trends that can be helpful in guiding decision-
making.
This article uses the framework of “myths and realities” to describe
10 key issues in energy purchasing. It relies heavily on market price
data and, in some cases, confronts conventional wisdom about recent
developments in the energy markets facing end-users. Readers should
note that most of this material is applicable to deregulated, as opposed
to regulated, markets.
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References
Energy Information Administration (EIA), U.S. Department of Energy, “Capacity
Additions, Retirements and Changes by Energy Source, 2006, Table 2.6,” Electric
Power Annual 2006. http://www.eia.doe.gov/cneaf/electricity/epa/epaxlfile2_6.
pdf [accessed August 8, 2008]. Calculation cited in text used Generator Nameplate
Capacity data and subtracted Generator Retirements from Generator Additions.
EIA, “Summary Statistics for Natural Gas in the United States, 2003-2007, Table 1,”
Natural Gas Annual 2007. http://www.eia.doe.gov/oil_gas/natural_gas/data_
publications/natural_gas_annual/nga.html [accessed January 17, 2010].
Data on the duration and volume of natural gas shut-ins were obtained from the
final reports on the storms published by Minerals Management Service (MMS),
U.S. Department of Interior. Specific references are “Hurricane Ivan Evacuation and
Production Shut-In Statistics” (as of February 14, 2005). http://www.mms.gov/
ooc/press/2005/press0214.htm [accessed July 14, 2005]; and “Hurricane Katrina/
Hurricane Rita Evacuation and Production Shut-In Statistics” (as of June 19, 2006).
http://www.mms.gov/ooc/press/2006/press0621.htm [accessed August 7, 2008].
Shut-ins resulting from Hurricanes Katrina and Rita continued past MMS’ final
report, and MMS stopped shut-in reporting after June 19, 2006.
Summer 2010, Vol. 30, No. 1
Data on total U.S. dry natural gas production were obtained from EIA, “Summary
of Natural Gas Supply and Disposition in the United States, 2003-2008 Table,”
Natural Gas Monthly, July 2008. http://www.eia.doe.gov/oil_gas/natural_gas/
data_publications/natural_gas_monthly/ngm.html [accessed August 7, 2008].
See EIA, The Impact of Tropical Cyclones on Gulf of Mexico Crude Oil and Natural
Gas Production, 2006, page 8. http://tonto.eia.doe.gov/FTPROOT/features/
hurricanes.pdf [accessed August 8, 2008].
See EIA, Impact of the 2008 Hurricanes on the Natural Gas Industry, 2009,
http://www.eia.doe.gov/pub/oil_gas/natural_gas/feature_articles/2009/
nghurricanes08/nghurricanes08.pdf [accessed January 17, 2010].
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