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• responsiblenergy • responsibleducation • responsiblenvironment • responsibleconomy • responsiblengagement
Natural Gas Market UpdateJohn Jicha - MGE Director - Energy Supply and TradingMadison Gas and Electric Company
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Agenda• What a difference ten years can make
• Low prices
• Fundamental factors impacting the energy markets
• Where do we go from here?
1
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Hurricane Katrina
2
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New Orleans
3
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NYMEX Natural Gas Futures
$0
$2
$4
$6
$8
$10
$12
$14
$16
Jun-95 Jun-96 Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05
$/D
th
Gas-Fired Generation
Hurricanes Katrina and Rita
Declining Production
4
Source: NYMEX
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Fundamentals of 2005
• Supply • Demand
5
Industrial, 30%
Electric Power, 27%
Residential, 22%
Commercial, 14%
Other, 8%Associated,
4%
Offshore, 15%
Onshore, 59%
Shale, 5%
LNG Imports, 3%
Pipeline Imports, 14%
Source: EIA
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NYMEX Natural Gas Futures
$0
$2
$4
$6
$8
$10
$12
$14
$16
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
$/D
th
6
2007Peak LNG
ImportsShale
Revolution Winter 2011-2012warmest in 65 years
Source: NYMEX
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NYMEX Natural Gas Futures
$2.40
$2.50
$2.60
$2.70
$2.80
$2.90
$3.00
$3.10
$3.20
$3.30
1/2/2015 2/2/2015 3/2/2015 4/2/2015 5/2/2015 6/2/2015 7/2/2015 8/2/2015 9/2/2015
$/D
th
7
Source: NYMEX
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Supply Fundamentals
8
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Production and Imports
-2-10123456789
2013 2014 2015 201660626466687072747678808284
U.S. Natural Gas Production and Importsbillion cubic feet per day (Bcf/d)
Federal Gulf of Mexico production (right axis) U.S. non-Gulf of Mexico production (right axis) U.S. net imports (right axis)
Total marketed production (left axis) Marketed production forecast (left axis)
annual change (Bcf/d)
Source: Short-Term Energy Outlook, September 2015.
9
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Rig Count
$0
$2
$4
$6
$8
$10
$12
$14
$16
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
$/D
th
# of
Rig
s
Natural Gas Rig Count Natural Gas Futures Price
10
Source: NYMEX and BakerHughes
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Production by Type
0
5
10
15
20
25
30
35
40
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040
Trill
ion
Cub
ic F
eet (
Tcf)
Alaska Coalbed methane Tight gas Lower 48 Offshore Other Onshore Shale gas
11
Source: EIA
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Map of Shale Basins
12
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Shale Production by Basin
0
5
10
15
20
25
30
35
40
45
Bcf
/d
Marcellus (PA,WV,OH & NY)
Utica (OH, PA & WV)
Haynesville (LA & TX)
Eagle Ford (TX)
Fayetteville (AR)
Barnett (TX)
Woodford (OK)
Bakken (ND)
Antrim (MI, IN, & OH)
Rest of US 'shale'
13
Source: EIA
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Shale Production
0
2
4
6
8
10
12
14
16
18
20
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040
Trill
ion
Cub
ic F
eet (
Tcf)
14
Source: EIA
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EIA Storage Inventory
20
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Demand Fundamentals
21
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Consumption
22
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Consumption Growth
4.83 4.65 4.20
3.00 3.23 3.610.61 0.81 1.63
5.878.23
9.38
7.71
9.6310.88
0
5
10
15
20
25
30
2005 2010 2015 2020 2025 2030 2035 2040
Trill
ion
Cub
ic F
eet (
Tcf)
Residential Commercial Transportation Electric power Industrial
23
Source: EIA
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Changes in Power Generation
0
1
2
3
4
5
6
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040
Trill
ion
kilo
wat
t hou
rs
Petroleum & Other/Other Nuclear Coal Renewable Natural Gas
19% 28%
31%
24
Source: EIA
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Net Pipeline Imports (Exports)
-1.50
-1.00
-0.50
0.00
0.50
1.00
1.50
2.00
2.50
3.00
2012 2014 2016 2018 2020 2022 2024
Trill
ion
Cub
ic F
eet (
Tcf)
2015 Outlook 2005 Outlook
26
Source: EIA
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LNG Net Imports (Exports)
-3.00
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
2012 2014 2016 2018 2020 2022 2024
Trill
ion
Cub
ic F
eet (
Tcf)
2015 Outlook 2005 Outlook
27
Source: EIA
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World LNG Prices
28
Source: FERC
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LNG Export Terminals• Approved – Under Construction
Sabine Pass LNG – 2.76 Bcf/d
Cameron LNG – 1.7 Bcf/d
Freeport LNG – 1.8 Bcf/d
Cove Point LNG – 0.82 Bcf/d
Corpus Christi LNG – 2.14 Bcf/d
• Approved – Not Under Construction
Sabine Pass LNG – 1.40 Bcf/d
• Current Exports
ConocoPhillips, Kenai, AK Re-exports 13.3 Bcf per year or
about 0.036 Bcf/d to Japan
Freeport LNG, Freeport, TX Exports 2.66 Bcf per year or about
0.007 Bcf/d to Brazil
30
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Outlook
31
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Heating Degree Days
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
November December January February March
2013-20142014-2015Normal
32
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El Niño• Could be among the top four strongest on record
• Last strong El Niño occurred in 1997-1998
• Weather Impacts
Warmer than normal
Drier than normal
• Limits the development and strengthening of tropical cyclones
33
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El Niño
34
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Winter 2015-2016 Forecast
NOAA (January-March) Farmer’s Almanac (January-March)
35
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Future Prices
$2.50
$2.75
$3.00
$3.25
$3.50
$3.75
$4.00
$4.25
$4.50
$4.75
Oct
-15
Mar
-16
Aug
-16
Jan-
17Ju
n-17
Nov
-17
Apr
-18
Sep
-18
Feb-
19Ju
l-19
Dec
-19
May
-20
Oct
-20
Mar
-21
Aug
-21
Jan-
22Ju
n-22
Nov
-22
Apr
-23
Sep
-23
Feb-
24Ju
l-24
Dec
-24
May
-25
Oct
-25
Mar
-26
Aug
-26
Jan-
27Ju
n-27
Nov
-27
$/D
th
36
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Key Takeaways• Demand growth expected to be 15+ Bcf/d
• Mid-continent 5-year gas demand growth driven by increases in natural gas-fired power generation capacity
• At current prices, supply will be flat to small growth year to year
• Changes in gas flows into the Midwest
• Prices will be relatively stable in the short-term
• Prices in the long-term may increase as increased demand potentially outpaces supply
37
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On Demand Savings ProgramMatthew Matenaer P.E. - Senior Program ManagerFocus on Energy
FOCUS ON ENERGYON DEMAND SAVINGS PROGRAM
MADISON GAS AND ELECTRICMAJOR CUSTOMER COUNCIL MEETING
Matthew MatenaerProgram ManagerOctober 6, 2015
BACKGROUND
42
• National Governors Association Award• Intent of the ODS Program
– Short-term– Long-term
• Program Timeline– June 2015 to December 2016– Active Summertime Periods: June – September– On-Peak Periods: 10 a.m. – 9 p.m., Monday-Friday excluding holidays
CUSTOMER ELIGIBILITY CRITERIA
43
• MGE Demand customer of 20 kW+ (on-peak)– CG-2, CG-4, CG-6
• Target customers: – 150 kW +– Existing EMS– Ability to cycle
equipment or stagger start-up times
TARGETED CUSTOMER TYPES
44
• Healthcare• Cold Storage• Local Government• Retail• Commercial Office• Lodging• Industrial
45
ON-PEAK DEMAND SAVINGS METHODOLOGY
46
ON-PEAK DEMAND SAVINGS METHODOLOGY
47
ON-PEAK DEMAND SAVINGS METHODOLOGY
COMMON DEMAND LIMITING STRATEGIES
• HVAC pre-cooling and control sequencing• Float temperature set points• Set kW thresholds in EMS• Set lighting schedules based on space occupancy• Staggering equipment run times• Delay battery recharging• Compressor cycling
48
ELIGIBLE CUSTOMER INCENTIVES
• $10/on-peak kW shed per month– Example: 55 kW (June) x $10 + 50 kW (July) x $10 + 60 kW (August) x $10 +
70 kW (September) x $10 = $2,350
• $500 fee reimbursement for installation of pulse output signal provided by MGE
• $1500 co-pay for EMS – pulse output signal connection• 10% efficiency bonus for capital projects that qualify for Focus on
Energy on-peak kW savings– Example: Capital project for LED stairwell lighting eligible for $1500
incentive; when approved, $150 bonus added for enrollment in ODS
49
PARTICIPANT COST-REDUCTION IMPACT
• Scenario: CG-2 customer (200-1000 kW) saves 55, 50, 60, 70 kW for the months of June-Sept. Total economic benefit to ODS participant for 4-month participation period:
50
Utility/Program Cost-Savings Category Cost Savings
ODS Incentives ($10/kW/month) $2,350
On-peak Demand Savings (~$0.45/kW/day) $3,230
Customer Max Demand Savings* (~$0.10/kW/day) $1,930
Electricity Consumption Savings (base + peak ~$0.10/kWh) $930
Total Savings: $8,440
*Assuming max demand is set in summer, 12 months worth of savings
ADDITIONAL BENEFITS OF PARTICIPATION
• FREE value add to participants• Tracks demand savings and consumption
savings over time compared to the customized baseline
• Capable of push messaging to facilities staff• Tracks energy efficiency upgrade performance
through energy markers• Installation requirements:
– LAN Ethernet connection, power source near meter
51
ROLE OF TRADE ALLIES
• Leverage existing customer relationships with Trade Allies that perform ongoing maintenance of existing EMS
• Trade Ally responsible for identification and implementation of demand limiting strategies into customer EMS
• Trade Ally incentives: $100/kW (average annual)– Must be registered Trade Ally with Focus on Energy
52
CUSTOMER RECRUITMENT STRATEGY
• Recruitment Period– October 2015 - May 2016
• Ongoing collaboration with existing Focus on Energy non-residential program staff and MGE customer account representatives to identify ideal candidates
53
54
CONTACT ON DEMAND SAVINGS PROGRAM
Call: 855-754-0808
E-mail: demandsavings@focusonenergy.com
Visit: www.focusonenergy.com/business/on-demand-savings
/FOCUSONENERGY
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Community Energy ConversationsLynn Hobbie, Senior Vice President - Marketing and CommunicationsMadison Gas and Electric Company
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Community Energy Conversations • Ten years ago, we held our first community energy
conversations.
Informed our Energy 2015 Plan
Increased wind energy
Grew our green pricing program
Discontinued coal at the downtown plant
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• Our Energy World is Changing
We invite you to help MGE build a community energy company for the future.
With your help, MGE will create:
An energy plan that sets direction for the next 10 to 15 years for our energy supply mix and customer services.
A set of “next steps” programs, projects, and opportunities to work together with customers to move us in that direction.
Community Energy Conversations
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Community Energy Conversations• We are seeking input.
We’ve created a Discussion Guide that explores opportunities and challenges in a world of evolving technology.
Inviting customers to read it and share feedback with us.
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Community Energy Conversations• We are seeking input.
We’ve hired Justice and Sustainability Associates (JSA) to conduct in-person conversations.
Began with introductory meetings with various groups and stakeholders.
Holding 50 or more small group, deliberative conversations now and through fall.
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Community Energy Conversations• Objectives
We want to take advantage of new technology and respond to our customers’ evolving needs and preferences.
We’ve identified the following objectives that, taken together, reflect the kind of energy company we want to be in the future to best serve our community with respect to rapidly changing technology.
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Community Energy Conversations• Objectives
Objective 1: Provide our customers with options they want today and in the future.
Objective 2: Help our customers control their energy use and costs, which in turn will minimize the need for costly new electric generation and distribution systems.
Objective 3: Transition MGE to a more environmentally sustainable energy supply.
Objective 4: Provide a dynamic, integrated electric grid that supports a range of distributed and centralized energy technologies and reliable service to MGE customers at a reasonable cost.
Objective 5: Ensure that changing technology serves all customers equitably.
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Community Energy Conversations• Lend your voice to this important conversation.
Visit mge.com/conversations where you can:
Read the Discussion Guide and related information
Send us your feedback via an online work sheet
Major Customer Community Energy Conversation
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