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Natural Gas Pipeline Customer-Satisfaction Critical Success Factors

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The following points represent the generally accepted critical success factors for natural gas pipeline companies of choice that serve to quantify the perceptions and needs of their customers based on the latest Natural Gas Pipeline Customer Surveys (2013) by research firm Mastio and Company.

01).  A pipeline company’s ‘Firm’ (i.e., guaranteed) gas transportation services must be highly reliable (i.e., guaranteed) in order to justify the higher billing rates charged for this service.
2).  A pipeline company’s scheduled gas volumes must always be highly accurate in nature.
03).  A pipeline company’s information systems for nominating, scheduling, allocating, balancing, and invoicing gas transportation and storage services must be highly effective and reliable.
04).  Accurate operational information must be made readily available to all of a pipeline company’s customers per FERC regulations and mandates (e.g., Info Post).
05).  A pipeline company’s account representatives must be accessible on a 24 by 7 basis in order to help resolve any customer-support related business needs in a timely, courteous manner.
06).  A pipeline company’s account representatives must also be good listeners who are capable of providing prompt, accurate responses to customer inquiries/requests based high levels of industry sector expertise.
07).  Pipeline company initiated communications with gas shippers and supply operators must be highly meaningful, informative, and of high quality.
08).  A pipeline company must be willing and able to offer its customers flexible transportation services such as gas pooling and aggregation (e.g., TABS services, etc.).
09).  A pipeline company’s billing invoices must always be accurate in nature and delivered to its customers in a consistent, timely manner.
10).  A pipeline company must maintain a strong culture of integrity, accountability, and compliance in terms of conveying ethical, honest and transparent business conduct.
11).  A pipeline company must create and maintain superior and sustainable value for its investors, customers, employees, and the communities which it serves.
12).  A pipeline company must maintain safe, reliable, and environmentally sustainable operating environments with open communications to all parties concerned.
13).  A pipeline company must stay focused on contributing to the economic, environmental and social well-being of the communities which it serves.
14).  A pipeline company must continuously deliver sector-leading value to its investors and other stakeholders.
15).  A pipeline company’s employees, executives, and board members must all be fully committed to a culture of providing superior customer service in a fair, efficient, and reliable manner.

Relevant Notes –
a).  ‘Firm’ gas transportation services are designed to reserve pipeline space and guarantee subscribing customers (e.g., hospitals; schools; homes; offices; etc.) that their specific volumes of gas will be scheduled and transported when needed at higher firm based rates.  In addition, firm transportation rates include any capital and fixed costs involved with setting up the pipeline company’s ability to provide firm transportation services, as well as any variable transportation costs involved in transporting the gas volumes across pipeline sectors and interchanges (e.g., fuel charges; reservation charges; etc.).  Finally, firm transportation rates must be paid by firm customers whether or not their scheduled gas gets shipped (i.e., sometimes gas pipelines cannot transport all nominated gas due to peak constraints, etc.).

b).  ‘Interruptible’ gas transportation services are designed to enable subscribing customers (e.g., industrial concerns; power companies; etc.) to schedule and move gas on a pipeline at a lower billable rate if/when space is available, but not if the pipeline is full with higher priority firm gas at the time.  In addition, interruptible transportation rates also enable the pipeline company to recover a smaller percentage (i.e., than firm rates) of the capital and fixed costs involved with providing the service, as well as any variable costs involved in transporting the gas volumes across pipeline sectors and interchanges (e.g., fuel charges; reservation charges; etc.).

c).  Transporting compressed natural gas through pressurized pipelines is considered to be the most efficient and economically feasible method available to the industry; other methods, such as rail and vehicular transport, are considered less desirable due to the low density nature of natural gas (i.e., as opposed to liquids). In other words, gas transportation profitability is closely tied to the volumes of gas shipped, and higher volumes of gas can be delivered to customers through pressurized pipelines due to the gas compression advantage, etc.

d).  A pipeline’s greatest value is now being able to mitigate shipping bottlenecks and serve customers with a reliable (i.e., firm) gas supply even during period of peak market demand. This is all due to the advent of flat gas price spreads resulting from the usage of fracking techniques and the resulting new geographical supply areas (e.g., Marcellus Shale, etc.). As a result, legacy pipelines can no longer profit from previously existing geographical spot price differentials, where they would receive cheaper gas in one region of the country and ship it to delivery points in another region of the country and sell it a for higher price.

e).  A pipeline’s capacity now needs to be fully contracted per firm reservation agreements for revenue purposes as gas prices can no longer be arbitraged based on geographical origin (per section d above). Lower cost production and shipping tariffs in the newly developed shale areas is displacing higher-cost production and shipping tariffs in the traditional supply areas of the country, leaving some pipeline capacity underutilized due to the resulting reduction in gas flows along the traditional west-to-east pathways. Note: The implementation of flow reversals from cheaper supply sources in the east and transported to delivery points out west is one way to mitigate this under utilization issue.

Written by Larry Fry, CCP, MBA

July 22, 2015 at 1:30 pm