Natural Gas City Gate Delivery Price Model and Forecast

A regional, city gate gas price forecast was developed for the Energy Efficiency (EE) team. This gas price forecast is used by the team to help calculate non-electric benefits for energy efficiency measures. While the focus of energy efficiency in the Council's planning process is on electric efficiency, there are also efficiency measures that save both electricity and natural gas. For example, an efficient furnace fan or fan controller may be installed that saves electricity, but in doing so also savings heating energy provided by natural gas. Or another, upgrading windows in commercial buildings saves HVAC energy, which could be a combination of electric cooling, ventilation energy, and gas heating energy.

The city gate is the handoff point between the long-distance gas transport system and the local distribution companies (LDC). The LDC delivers gas to homes, businesses, and industrial users. A new delivery point tool was developed for the 2021 Power Plan to create the city-gate price forecast.

The model develops the historic relationships between the gas volumes and prices delivered to the city gate, gas prices at the regional gas hubs, and the pipeline transportation charges required to deliver the gas to the city gate.

Here’s the flow:

1. For each state:
   1. Historic natural gas volumes and prices at the city gate delivery point by state were collected via the EIA
   2. Assumptions were made regarding the mix of gas from the regional hubs. For example, Idaho city gate gas volumes and prices were modeled as a mix of Opal and AECO indexed gas. 
   3. The specific pipeline that delivers the gas to the city gate for each state was identified and that pipeline’s transportation delivery charge was collected

A model was established for each state to replicate the monthly gas price:

D_s,m = function(v_s,m,p_s,i,t_p,h_i,m)

where

D_s,m : delivered gas price $/MMBtu for state “s” and month “m”

v_s,m : gas volume for state “s” and month “m”

p_s,i   : proportion of gas for state “s” sourced for hub “i”

t_p     : pipeline transportation charge $/MMBtu for pipeline “p”

h_i,m : gas price at hub “i” and month “m” in $/MMBtu

An overall, regional city gate price was developed by weighting the state prices by volume.

Input Data & Sources

To create the forecast of future prices, the delivery model was used but with the hub price forecast data series resulting in a regional city gate price forecast by month for the 20-year planning horizon.  A low and high forecast range is also included based on the hub price forecast range, the forecast itself may be found here.