To our customer partners:
Northern would like to
provide the following overview and commentary on the severe weather event that
occurred in February. From February 4 through February 19, Northern’s Market
Area system weighted temperature remained at or below 10 degrees Fahrenheit.
During this time, Market Area deliveries averaged just over 4.8 Bcf/day, over
1.4 Bcf/day greater than the average for the winter period prior to this
extended cold snap.
Northern is pleased to
report that its system performed exceptionally
well throughout the severe weather event, and Northern did
not have any operational issues that required it to curtail volumes to any
customer. Northern was successful in delivering to customers the volumes that
were supplied to Northern’s system. Our
compression facilities attained 100% reliability, underground storage
facilities met all delivery orders, and liquefied natural gas facilities
achieved 100% availability. All of these were critical to maintaining pressure
and line pack requirements. Line pack daily targets were exceeded, putting
Northern in a strong position to serve its customers during the unprecedented
stretch of high demand.
late February 14, some natural gas suppliers were unable to deliver volumes
into Northern’s Field Area, which includes Texas, New Mexico, Oklahoma and
Kansas. In the early hours of February 15, Northern experienced a severe reduction
in Field Area receipts primarily caused by freezing production facilities and the
loss of electricity to processing plants. Northern notified customers of the
severe receipt point shortfall, identifying it as a Force Majeure event to be
clear that Northern would act immediately, outside of the normal North American
Energy Standards Board natural gas scheduling cycles, to match customers’
delivered volumes to the reduced receipt volumes and maintain an operationally
viable balance on the pipeline system to enable Northern to meet all customer commitments.
On the morning of February 16, receipts and deliveries on Northern’s system had
begun to stabilize and before noon on that date, Northern lifted the Force
Majeure event, indicating that it would rely on the normal scheduling processes
to handle any non-performance issues on its system. To be clear, throughout
this Force Majeure event, Northern remained willing and fully capable of
delivering all firm volumes that were received into Northern’s system.
this timeframe, the penalty structures that are in place in Northern’s tariff
that had been recently modified as a result of a collaborative effort between
Northern and its customers ensured that the proper incentives were in place to
maintain receipt and delivery balance. In recent days, other pipelines have
proposed to waive daily imbalance penalties after the fact. We do not believe
such an action is appropriate in Northern’s case. Since all penalties collected
are distributed back to customers, Northern is not in a position to
unilaterally give away customer money. In addition, it is Northern’s opinion
that an after-the-fact waiving of penalties actually penalizes customers that appropriately
maintained receipt and delivery balance while rewarding those that did not.
is proposing to expedite the return of penalties to customers outside of the
annual process to more quickly return collected penalties to its customers.
Details of such a proposal will be forthcoming and Northern remains open to
other crediting mechanisms or even a penalty waiver if customers agree
customers managed their business on Northern very well. Communications between
Northern and its customers were made throughout the February cold spell to
ensure continuous and efficient service. During the height of the loss of Field
Area supply, Northern is aware of at least 325,000 Dth/day of Market Area load
that was either reduced or replaced with customer peak-shaving capabilities.
Northern very much
appreciates the diligence and professionalism its customers displayed during
this period. Thank you for your business and, as always, please let any of us
at Northern know if there is anything else we can be doing for you.
President and CEO
BHE Pipeline Group
Customer Service and Business Development
Northern Natural Gas Company