2142 Actually Buying the

So—how does the gas user get down to the basics of buying natural gas? Do they call the local distributor, if the consuming facility is in an area served by the local distributor, or does the buyer shop around for the best price and service? Again, information and knowledge are the secret to success. The buyer must know what is needed to determine what path to follow in buying natural gas. If the buyer is looking for a source of gas for a new operations, one never before using natural gas as the fuel, then they must estimate the necessary parameters to know how much is needed to fill the requirements of that operation. If the buyer is replacing an expiring contract or having to change vendors, then they have the historical record to help in knowing what is needed to renew the supply sources. They can use the existing information and records to predict with greater accuracy what volume of gas will be needed, the changes on a daily or other time basis that will be needed and what were the prior costs for the gas supply. With this information, the fuel buyer can look for new sources to meet the needs more efficiently and cheaply.

The very first question to be answered is how much natural gas will be consumed on a daily basis and what will be the range of use on a daily, weekly, monthly and annual basis. The information could even be a question of an hourly rate as to how large a swing does the user anticipate. These are the big questions to answer in making the first step in trying to select a supplier or seller. Knowing the quantity and conditions of where the rate will vary are crucial to starting the buying process. Whether the consumer is a large or small user of gas will play a major role in what selections are open to it for purchasing gas. The physical conditions prevailing in the area of the location using the gas will play a role because of regulations of the area and the actual physical availability of pipes for transporting the gas to the consumer.

Typically, the break from a small user to a large one is a rate of about one thousand cubic feet per day or in energy units, about a million Btu per day. Most local gas distribution companies will talk in "therms" and "dekatherms" rather than Btu or cubic feet. The dekatherm is ten therms. Each therm is 100,000 Btu. Each dekatherm is one million Btu. The line between large and small users is not rigid. Applications coming close to this approximation may still meet the criteria for going the large user route. If the user is on the small side, depending on the state or location of the use, it still may have an alternative of buying from the local distribution company or using the LDC for transportation only and buying the commodity from a marketing entity. Making contact with marketing companies, which will be discussed later, and getting information on the local regulatory rules will help in making this decision. Many local distribution companies have set up their own non-regulated marketing companies to help consumers buy gas at the lowest price with the required service criteria of their own operations. One should not forget the potential of ECommerce, the newest way to buy and sell natural gas. A smart buyer will look at all possible sources for meeting his requirements at the lowest price but with reliability and service.

In buying a commodity like natural gas, price alone should not be the only criteria. Service (security of service, emergency additional supplies, etc.) equally impacts the buyer's bottom line as does price in meeting fuel requirements. Having a cheap supply of gas where its availability is so uncertain as to disrupt plant or business operations is really an expensive supply when looked at in the total picture. Security of supply or additional supplies, etc. is a valuable consideration to be included in pricing natural gas sources.

The large users—those over the thousand cubic feet level or close to it, should investigate all possible sources for supply and transportation. Their sources may go all the way back to the wellhead or producer marketing companies. Depending on how large a supply is needed at a given location, the buyer may include dealing with pipelines and distribution companies for transportation and delivery of the gas. Once the buyer knows in general which direction to go, the big issues then become finding a marketer, transportation, and contracts for the services and commodity.

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