3 Ways Your Utility can Benefit from LNG
Aaron Johnson, President & CEO at Kinetrex Energy
As a gas utility, you are constantly under competing pressures. Your customers want reliable service at a good price. Your investors are happy to accommodate your customers, but they want a fair return for their investments. Using the typical approach, the number of investments that satisfy both your customers and your investors is limited . . . Until now.
Liquefied natural gas (LNG) changes your model to benefit both your customers and your investors. Specifically, there are three ways in which your utility will benefit from adding the option of LNG to your system supply.
1. LNG can greatly enhance system integrity. Let’s face it, gas utility professionals are, with good reason, conservative. If you make mistakes, bad things happen. Pipeline force majeure and operational flow orders can limit access to your off-system storage.
With LNG, your storage is on-system thereby giving you added protection. LNG can give you immediate access to gas in low pressure areas on your system, which could be the perfect alternative to an expensive distribution system upgrade. LNG can also act as a temporary source of supply for your pipeline integrity projects so that the gas never needs to stop flowing to your customers.
2. LNG can be used for peak shaving. The pipeline and storage model relies upon straight fixed variable pricing. That is, you pay the pipeline for your peak day capacity regardless of whether that capacity is used (remember you’re conservative and so you rarely ever use your peak day). Paying for that peak day every day adds up on a year around basis. In addition to being expensive, these investments in capacity are operating expenses (not rate base investments).
Create a “win/win” with Kinetrex’s micro peak shaving systems by using LNG to satisfy your peak day capacity. Not only will you lower your contracted pipeline capacity, hence your operating expenses and revenue requirement, but you will increase your rate base and net operating income. Your customers will save money, you’ll sleep well knowing your peak day is satisfied and your investors will be happy because you converted an operating expense (pipeline demand costs) into rate base (LNG storage and vaporization equipment).
3. LNG can be used for your underserved customers or the creation of “gas islands”. How many times have your business development team members received calls from customers wanting to expand, only to lose the opportunity because of a lack of additional pipeline capacity or the cost of upgrading your system to serve the customer isn’t timely or too costly?
Kinetrex SRS Virtual Pipeline System can be set up quickly with no utility or customer investment so that you never have to say no again. Similarly, how many times have you been unable to expand your service territory or lost out to a neighboring utility because your main extensions could not meet your economic hurdles? Again, clear those hurdles and beat competitor utilities by opening virgin territory with the SRS Virtual Pipeline System.
About Kinetrex Energy
Kinetrex is the U.S.’s leading inter-state liquefied natural gas (LNG) company and operates two significant LNG production facilities. Kinetrex provides turn-key energy solutions from a comprehensive portfolio of natural gas solutions including: LNG, renewable natural gas (RNG) and pipeline natural gas for customers in the agricultural, asphalt, industrial, transportation, and utilities markets.
For information about Kinetrex Energy’s sustainability efforts, view our Sustainability Report here.