natural gas fuel oil electricity naruc november 2007
TRANSCRIPT
Natural Gas
Fuel Oil
Electricity
NARUC
November 2007
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John B. Hess Chair John B. Hess
Chairman of the Board& Chief Executive Officer
“As an industry leader, we believe an educated customer adds value to the strength of our services.”
Introduction
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• Hess Oil founded in 1933 by Leon Hess; merged with Amerada in 1968
• Built on a commitment to customer service
• Grown to be a leading independent energy company
• Fortune™ 100, fully integrated energy company:
– Exploration, production, refining, retail gasoline, and Commercial & Industrial energy marketing
Hess is a leader in producing, refining and marketing energy.
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Geographic Focus
Hess is a regional total energy supplier.
Pittsburgh
Charlotte
Baltimore
Syracuse
Woodbridge
Providence
Oil Only
Gas Only
Gas + Oil
Gas + Oil + Electricity
Oil 15 States
Gas 15 States
Electricity 10 States
Gas + Electricity
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Hess Organization
Marketing and refining has four major business lines…
• Leading energy supplier to commercial, industrial, and wholesale customers
• East Coast and Ohio Valley geographies
• Significant presence in natural gas, fuel oil, and electricity
Retail Sales & Marketing
Supply & Terminals
Energy Marketing
• Over 1,350 locations
• Leading independent convenience retail marketer on the East Coast
• Set standards for quality, service and cleanliness
• Optimizes East Coast storage assets to supply petroleum products through 22 terminals
• Markets crude production
• Can handle new Ultra Low Sulfur Diesel
Tank P
ictur
e
Refining
• St. Croix, USVI refinery, jointly owned with Petroleos de Venezuela
• Port Reading, NJ refinery supplies Eastern US markets
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Hess – Electricity Market Area
N. Y. S. Electric and Gas
National Grid
Consolidated Edison Co.
Orange and Rockland
Rochester Gas and Electric
Central Hudson Gas & Electric
New York
Delmarva Power & LightDelaware
United Illuminating
Connecticut Light & Power/ Northeast Utilities
Connecticut
Rhode Island
Narangaset Electric Co. / National Grid
Baltimore Gas and Electric
Allegheny Power
Maryland
Delmarva Power & Light
Pepco
Duquesne Light Co.
Penelec (First Energy)
PECO Energy/ Exelon
Pennsylvania
Allegheny Power
UGI
Wellsboro Electric
Penn Power
Pennsylvania Power & LightPublic Service Electric and Gas
Jersey Central Power and Light
Rockland Electric Co.
New Jersey
Atlantic Electric
Maine
Central Maine Power
Bangor Hydro-Electric
District of Columbia
Pepco
Public Service of New Hampshire/ Northeast Utilities
New Hampshire
Granite State / National Grid
Fitchburg Gas & Electric/ UnitilMassachusetts
Massachusetts Electric, Nantucket Electric/ National Grid
Boston Edison, Cambridge, Commonwealth/ NSTAR
Municipal Electric Departments
Western Massachusetts Electric/ Northeast Utilities
Hess focuses its C&I business in 36 core EDC markets.
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Hess Natural Gas Market Area
Hess focuses its C&I business in 54 core LDC markets.
Columbia Gas of Ohio
Overlap
Ohio
Hope GasAllegheny EnergyOverlap
West Virginia
UGI Utilities
Columbia Gas of PA
PP&L/Penn Fuel Gas
Dominion-Peoples
Equitable Gas
Overlap
Pennsylvania
PECO
BG&ECONECTIV
Washington Gas Light
Columbia Gas of VA
North Carolina
PiedmontRhode Island
Providence Gas Co.
Valley Gas Co
(New England Gas)
Connecticut
Yankee Gas Services Co.
Southern Connecticut Gas
Connecticut Natural Gas Corp
Corning Natural Gas Co.
Central Hudson Gas & Elect. Corp.
Niagara Mohawk Corporation
NY State Electric and Gas Corp.
Rochester Gas and Electric Corp.
New York
Keyspan Energy Delivery NY
Consolidated Edison Co. of NY, Inc.
Orange & Rockland Utilities
Elizabethtown Gas Company
New Jersey Natural Gas Co.
South Jersey Gas
New Jersey
PSE&G
Keyspan Energy Delivery Long Island
New Hampshire
Keyspan Energy Delivery NH
Massachusetts
Boston Gas Co. (Keyspan)
Colonial Gas (Keyspan)
Baystate State Gas Co.
Commonwealth Nstar
Berkshire Gas
Fall River
Dominion East Ohio Gas
Cincinnati Gas & Electric
Northeast Ohio
PGW
NCNG
PSNC
PG Energy
Valley Cities
Northern Utilities NH
Maine
Northern Utilities Maine
Maine Natural Gas
Overlap
DelawareMaryland
Washington Gas Light
Virginia
South Carolina
PiedmontSCANA
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Natural Gas Supply Assets
We have built a strong supply network that often creates optimization opportunities…
1.05 Bcf/d Pipeline Capacity
19 Bcf Natural Gas StorageSupply from
Eastern Canada
Supply from Atlantic Canada
Supply from Gulf of Mexico
LNG
Supply from Midwest
Diverse Supply Sources
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• Hess serves about 22,000 Commercial and Industrial (C&I) natural gas
customers throughout the Eastern US.
• Hess is one of the largest Natural Gas Marketers in the Eastern US, and is
dedicated to continued growth and customer service.
• Hess is the largest C&I market share by volume among Natural Gas Marketers
in New York, New Jersey, Ohio, Massachusetts and Rhode Island.
Natural Gas Business
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How it works
• DEO replaced its gas cost recovery mechanism with a standard service offer
• All customers who had not switched to DEO’s choice program are eligible
• DEO buys gas for their customers from suppliers
• The price of gas is passed on to customers at SSO rate
• DEO continues to deliver gas to all customers, offers payment plans and handles all emergency and customer service calls
Dominion East Ohio SSO Service
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How the SSO rate was determined
• A descending clock auction was held August 29, 2006.
• Bids were received from 12 wholesale suppliers based on fixed adjustments to the NYMEX settlement price
• SSO rate changes monthly and DEO does not earn a profit on the gas it sells to customers, the purchased cost is passed on dollar for dollar directly to customers
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Positives for participants
DEO
• DEO is able to exit the merchant function and is no longer subject to reviews for gas cost
PUCO
• No longer have to regulate gas costs
• Reliability is maintained because the utility remains in control of distribution, system operations and planning for future added load
• Percentage of Income Payment Plan (PIPP) customers are guaranteed the same low price as the SSO customers
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Positives for participants
Customers
• All customers have the benefit of competition without having to shop
• The customers are able to maintain their relationship with the utility
• The customers have PUCO protection
• Customers are assured the cheapest rates
• SSO customer can still switch to choice at any time
• The auction creates an easily determined comparable shopping rate
• An educated customer is needed for choice to work and some customers aren’t willing to spend the time to do the research
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Evolution of SSO
• In the future we can change the way the price is derived
• Incentive for continued product development