FW: Daily Measurement

The attached is a result of a phone call that I made to Rita to find out where we may have talked about daily measurement in the tariff just in case we need to explain this further to the Measurement Group.

Thanks,

Raetta

-----Original Message-----
From: Bianchi, Rita
Sent: Monday, November 12, 2001 10:11 AM
To: Zadow, Raetta
Subject: Daily Measurement

I looked at the tariff and talked to Mary Darveaux. NNG must have true daily measured volumes, as opposed to a monthly measurement divided by days in the month, for several business reasons.

References to daily volumes and calculations are sprinkled throughout the tariff.
1. For example, under the TF & TFX Rate Schedules, the tariff states that the MDQ (maximum daily quantity) is the firm service that NNG is obligated to provide on a daily basis. We can't provide a daily service if we do not have daily measurements.
2. Curtailment provisions in the tariff require DAILY measurement.
3. DDVCs require accurate DAILY measurement. DDVCs are a part of NNG's revenue. Even if NNG were to bill on scheduled volumes at the beginning of the month, true-up to actuals would be required. DDVCs would not disappear, they would simply move from the commodity billing to imbalance billing after measurement close. Order 637 may change some aspects of DDVCs but it will not eliminate them or change the daily nature of the abuses DDVCs are designed to discourage.

Furthermore -
1. That's the way the gas transportation industry operates. It may not be a GISB standard, but it is a fact of life.
2. Most contracts executed through EOL are for 1-2 days of service at a time. Gas flowing at a point could vary significantly during the month and a point may be used by different parties at different times. We can't just assume that the same amount flowed every day for everyone.
3. Overrun charges are based on gas flows above the contract MDQ (Maximum DAILY Quantity) each day of the month. Using an artificial, average daily measurement would mask overrun volumes (and reduce NNG revenue, since Overrun pays a higher rate than firm commodity). A shipper could avoid paying overrun if it flowed below MDQ on some days and above on others.
4. We have several contracts with volumetric provisions which cannot be accurately billed without DAILY measurements. An example would be Utilicorp and all of its Taconite contracts.
5. NNG is looking at moving to daily dollar-valued OBAs. If NNG can't tell what is flowing on a daily basis, customers can game the system by pushing extra gas into the pipe on days when the price is lower and withdrawing it on other days when the price is slightly higher. Gas prices can fluctuate considerably during the month. Multiplied times a bcf of gas, even a fraction of a cent change adds up to real money.