EIA details contract types for natural gas purchases

The U.S. Energy Information Administration (EIA) issued a press release recently outlining the types of contracts that natural gas plants use to fulfill their fuel requirements.

The majority of natural gas plants in the continental United States use firm contracts that require the producer and pipeline operator to send the natural gas to the plant when requested, EIA said. Power plants in this category received 71 percent of the natural gas purchased by power plants in 2016.

Firm contracts are more expensive than interruptible agreements but provide more reliability. They are more common in the Western and Southern United States.

Approximately 16 percent of natural gas used for power generation in 2016 was purchased using only interruptible contracts, which give the supplier or pipeline operator the option to interrupt the fuel supply for contractually stipulated reasons.

Interruptible contracts, also called non-firm contracts, are often set up for short periods and used for next-day delivery. They are more common in the Northeastern United States. More natural gas was purchased in the northeast using interruptible than with firm contracts in 2016.

The remaining 13 percent of natural gas was purchased by plants through a mix of firm and interruptible contracts.

EIA began differentiating the type of arrangements for the supply and delivery components of fuel purchase contracts in its power plant data in 2016.