Key Players in the Natural Gas System

The gas transportation system consists of several components that play a vital role in delivering gas to generators, who must take delivery of gas as they operate.

Gas Transportation System

Producers: Gas producers are entities that focus on the extraction and refinement of natural gas. These entities’ primary focus is finding viable gas sites, known as plays, and extracting gas from these sites. Once the gas is extracted, it usually must be refined to remove any impurities. After being refined, the natural gas can be sold directly to consumers, local distributions companies or gas marketers, who are profiled below. Producers can affect gas deliveries to generation if they are forced to curtail production, as this can reduce the pressure needed on interstate pipelines to maintain reliability while serving all customers.

Interstate Pipelines: Once producers sell natural gas to the purchaser, the purchaser must then schedule transportation from the producer on the interstate pipeline system. Interstate pipelines move gas over large geographic areas and largely resemble transmission lines in the electric industry. Gas-fired generators, due to the sheer amount of gas they can demand, can elect to directly interconnect into interstate pipelines. Interstate pipelines can affect gas deliveries to electric generation by limiting the amount of interruptible transportation on their system, which is the type of transportation service used by most generators. Generators that elect to use firm gas transportation are much less likely to have gas deliveries interrupted, even during peak gas demand periods.

Local Distribution Companies: The final step of the physical transportation system is the local distribution company or LDC. LDCs resemble load serving entities in the electric industry and design their systems to serve smaller end-use consumers, such as residential heating, but also can serve generation. Unlike interstate pipelines, LDCs reserve the right to interrupt gas deliveries to generators on peak demand days and at the LDC’s discretion. This situation can cause reliability issues if gas deliveries are interrupted on peak electric demand days in the winter.

Gas Marketers: Many generators rely on gas marketers to coordinate all these separate moving parts and deliver gas to their plants. Gas marketers can work with all points of the production and transportation system on behalf of the generator, providing either the gas commodity itself, transportation, or both. The vast majority of gas-fired generation owners in PJM use gas marketers to some degree to procure gas, making the role that gas marketers play important in coordinating this complex transportation system.