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District Energy System

General Manager's Corner

Tim HestleSpring 2014
By: Tim Hestle

Gas Curtailment

It’s no secret that natural gas is on the rise in America’s energy landscape. Natural gas is clean-burning, generally abundant and easy to transport. Add in the fact that natural gas is now so much cheaper than other fuels, and it becomes clear why so many industries are buying into this fuel.The boiler industry has taken advantage of the benefits of natural gas for over half a century, making gas-fired boilers a common sight in today’s market.

Unfortunately, there is a negative consequence to using natural gas. Until this past winter, the country had not seen a widespread gas curtailment in several years. For those who do not know what a “Curtailment” is, the simple explanation is a reduction in the amount of gas that a utility company can deliver to a customer due to a supply shortage or because the overall demand exceeds the pipeline’s normal capacity.

The way the system works is this: There are “firm” gas customers and “interruptible” load customers. Firm customers are those who cannot afford to have their gas supplies interrupted, such as residential customers who depend on gas furnaces to heat their homes or industrial customers who have processes that rely on burning gas to produce their products. Interruptible customers are those who can afford to cut back or eliminate their gas consumption because they have an alternative fuel source. These customers are rewarded for this flexibility with lower gas prices from their utility company.

The majority of the time, the existing pipelines can supply enough fuel to cover the nation’s demand for gas; but when temperatures dip below 10°F for extended periods and more heating is required, or if there is a hurricane that requires wells, pumping stations, etc. to be evacuated or temporarily shut down, utilities cannot deliver enough gas at the proper pressure for everyone’s needs. This is when the gas companies notify their interruptible customers to reduce, or curtail, their gas usage.

With the exceptionally low temperatures seen in the winter of 2013-2014, many interruptible service customers who run their steam boilers off natural gas have quickly found themselves with less fuel supply than they needed to operate their processes. Luckily, most boiler manufacturers have designed their boilers to run off multiple forms of fuel, so propane, #2 fuel oil and other fuel sources were used while curtailments were in effect.

The primary fuel for the Nashville District Energy System boilers is natural gas, and the plant is considered an interruptible gas customer. Winters in middle Tennessee are generally very mild; however, our local gas supplier requested we curtail our use of gas on five separate occasions during the month of January 2014 when temperatures plummeted into the single digits. This is the first time we have ever been required to comply with a curtailment.

The energy generation facility’s backup fuel is propane. During the hurricane season, propane is generally plentiful and transportation is not an issue; but in the middle of an extremely cold winter, propane becomes scarcer, and if roads are icy, delivery can become a problem. During the recent curtailment periods, propane was purchased from several local vendors in an attempt to secure the volume required to keep our heating plant online. Prolonged freezing temperatures across the country caused a national propane shortage, so our vendors were forced to bring in propane from neighboring states like Alabama, Georgia and Kentucky when it was available.

Due to fuel delivery schedules, sometimes it is not possible to be totally off natural gas. If a company has opted in to interruptible service, failure to comply with a curtailment request usually results in a penalty, either in the form of a fine, increased fuel prices or both. DES representatives are currently investigating additional backup fuel storage and the possibility of alternative fuels to reduce or avoid penalties should the plant be requested to participate in another curtailment.

During the recent curtailment periods, the cost for burning propane was approximately five times greater than the normal price of natural gas. Even though this seems extremely high, it was still less than the price of gas if one were assessed curtailment noncompliance penalties. Additionally, according to Metro representatives, over the past decade DES customers have enjoyed a savings of nearly $1 million per year by the Nashville DES’ being able to take advantage of the interruptible natural gas rates.