OFO and Curtailment
Sometimes energy usage comes close to exceeding capacity, particularly during peak-load seasons. When this happens SEMI relies on two common methods to protect the operational integrity of the pipeline: curtailment and operational flow orders (OFO).
Each of the local distribution companies (LDCs) and market areas that we serve treat curtailments differently. In the Georgia market, we are responsible for contacting each of our interruptible customers to communicate curtailment or OFOs. In North Carolina, curtailment orders are issued directly to the customer from the LDC.
Learn how these methods can impact your company’s supply of natural gas and your costs by clicking on the links below.
Operational Flow Order (OFO)
Operational Flow Order (OFO)
SEMI prepares customer load forecasts and supply forecasts, and from these develops a pipeline inventory forecast. That forecast is compared against our pipeline inventory limits. When the forecasted inventory is greater than or less than the pipeline inventory limits, we use storage assets (reserved for balancing) to help manage either the excess or insufficient inventory.
If this isn’t adequate to correct the imbalance, we issue an Operational Flow Order (OFO) notice. An OFO requires shippers to balance their supply with their customers' usage on a daily basis, within a specified tolerance band. Shippers may deliver additional supply or limit their supply in order to match customers’ usage. If the supply isn’t balanced, shippers may incur noncompliance charges.
The OFO typically states:
- The OFO stage (from 1 to 5)
- The system inventory level (high or low)
- The noncompliance charge
- The tolerance band (percent of allowable variance)
For example, if we declare a Stage 1 OFO with a tolerance band of 5% for high inventory, supplies must not be more than 105% of actual usage or a noncompliance charge is assessed.
When you contract for natural gas transportation services with SEMI, you have the choice of two types of contracts:
- Firm transportation, in which there is no interruption in service. This is the highest quality sales or transmission service offered to customers under a filed rate schedule that anticipates no planned interruption. Firm transportation service is usually associated with distribution companies that serve residential customers and other "high priority end-users," but can also apply to upstream pipelines and other customers.
- Interruptible transportation, which provides certain customers – mainly larger commercial and industrial customers that have dual-fuel capability – the opportunity to pay lower transportation charges by permitting us to interrupt their gas usage on short notice, generally in peak-load seasons. This type of natural gas service is subject to interruption at the option of the pipeline. It’s also sometimes referred to as "best efforts." Tariffs for interruptible service are cheaper than firm service.
It’s important to fully understand the specific operational requirements of your firm transportation or Interruptible transportation account. Speak to your account manager if you have questions.
For our customers who choose interruptible transportation, we issue a curtailment order when we have to interrupt your service. This means energy reserves have dropped or are expected to drop below a certain level. The curtailment order signals that rotating outages are going to occur.
Most customers with alternative fuel sources (#2 oil, #6 oil, waste oil, coal and others) choose interruptible service for the majority of their energy load. However, customers agreeing to interruptible service must comply with curtailment orders or pay noncompliance fees.
Interruptible customers are curtailed in order of priority to ensure firm deliveries are met. Residential customers, small general service rate customers and other end users holding firm transportation contracts will not be curtailed.
The following is an example of a curtailment notice:
Effective Wednesday, January 2, 2004 at 10 a.m. and until further notice, SCANA Energy Marketing is curtailing interruptible volumes in response to AGLC issuing a demand mismatch order for ALL primary pools.
This demand mismatch order carries a $30 per dekatherm penalty for every dekatherm of usage over your supply!
A curtailment notice is extremely important in that it may result in significant penalties (upwards of $30 per dekatherm) for customers who do not comply.
In the event a curtailment notice is issued, we will detail the specific action(s) required.