Evaluation of the EIA-910 Survey

Residential and Commercial Natural Gas Prices

Thursday October 15 at 3:15 pm Breakout session #5

# Introduction

The purpose of the Form EIA-910, "Monthly Natural Gas Marketers Survey,"
is to capture the price of natural gas sold by marketers to residential
and commercial customers. Since the introduction of customer choice
programs in these two sectors, EIA's coverage of these price data has
declined. This survey is meant to fill that gap, by going to the
marketers that sell the gas and asking them to report volume sold and
revenue so that EIA can report a volume weighted price. The survey
currently goes to marketers in five (5) states with active customer
choice programs. There is no sampling, and the number of active
marketers varies by state from 8 or less to over 30. The survey has been
in place since August 2001.

The purpose of this report is to evaluate the quality of the EIA-910
data that EIA received for calendar year 2002. The Natural Gas Division
will examine the findings of this evaluation, decide upon the necessity
and feasibility of expanding the survey beyond the five states already
being surveyed, and will make other possible changes to the collection
and dissemination of the EIA-910. The evaluation is divided into three
(3) related tasks:

1.  Evaluate the coverage of the EIA-910 volume data: How much of the
    "missing" price related volume did the EIA-910 recover.

2\. Evaluate the quality of the EIA-910 price data: How accurate are the
data that EIA has collected from marketers?

3.  Provide options for expanding the survey to marketers who sell in
    states in addition to the five states currently covered by the
    survey. Is it necessary, and resource efficient, to expand the
    survey to additional states?

# Evaluating the Coverage

The Form EIA-857, "Monthly Report of Natural Gas Purchases and
Deliveries to Consumers," collects the volume in thousand cubic feet
(mcf) of natural gas sold on-system by the Local Distribution Company
(LDC) as well as the volume transported by the LDC but sold by
marketers. The percent of on-system sales is very small in Georgia, due
to the way in which deregulation operates in that state. In the other
four states, the percentage is relatively flat for Residential sales,
but shows general variability and some seasonality for commercial.
(Further analysis of the 857 data is outside of the scope of this
project, which focuses on the 910 survey data.) The volume of
transported gas as collected on the 857 survey offers a benchmark for
the volume reported on the EIA-910 survey. Ideally, these amounts should
track closely, with only billing cycle differences. Staff working on the
EIA 910 survey compare these volumes on a regular basis, using plots
similar showing both volumes on a monthly basis. For this study, we also
looked at tables of annual volumes, which will lessen billing-cycle
impacts.

**Table One -- Ratio of 910 Volume (mcf) to 857 Transported Volume (mcf)
for calendar year 2002**

  ------------- ----------- ----------- ----------- ----------- -----------
                GA          MD          NY          OH          PA

  Residential   .80         .77         .86         1.15        1.26

  Commercial    .89         1.03        .90         .96         1.69

  Combined      .82         .96         .89         1.06        1.57
  ------------- ----------- ----------- ----------- ----------- -----------

Based on data in system as of July 2, 2003

All of these approaches reach the same conclusion, namely that although
the match is not perfect, it is deemed to be acceptable in all states.
(HOWEVER, NO STATISTICAL TESTS WERE DONE TO COMPARE THESE VOLUMES. THE
910 VOLUMES REPRESENT A COMPLETE CENSUS WITH NO SAMPLING. THE 857 HAS
SAMPLING, BUT ONLY AGGREGATE STATE TOTALS WERE USED HERE) The largest
differences are in Pennsylvania, where the 910 volumes averaged well
above those from the 857. This is still the case after careful editing
had reduced this number by removing double counting by two marketers
that had merged, and asking one or more survey respondents to check if
they were including industrial customers. Other possible reasons for the
910 volumes being high are sales across state lines or counting sales
between marketers. The volumes tend to be low in Georgia, which could
indicate that the 910 survey is missing some of the data. The combined
residential and commercial volumes were calculated in an attempt to
determine whether misreporting between these two categories was
occurring, but that does not appear to be the case for Georgia nor
Pennsylvania. However, these volume comparisons only serve as a check,
since the volumes from the 910 survey are not published.

The respondent-level records were reviewed to determine the extent of
missing data. In only a few cases were there gaps in a respondent's
reporting, although missing the most recent month was most common. All
of these were known to the survey staff and were on the list of
non-respondents. This would contribute slightly to the 910 volumes being
low since the 910 data has no imputation for volume.

[Price Quality]{.underline}

Response rates were good, with a minimum unit response rate of 89% and
only one volume weighted response rate below 92%. The weighted response
rate is calculated using the most recent three months of market share.
These formulas were reviewed and deemed to be appropriate.

The edit rules have critical flags for the situations that have
mathematical errors, such as volumes being reported with no revenue, or
one or more customers but no volumes. The warning flags have two
categories, with critical warnings being likely to be in error, such as
a residential price over \$25.00 per therm. Non-critical warning flags
are generated for large changes in number of customers or market share.
These rules seem reasonable.

At the respondent level, the 910 prices do exhibit more variability in
some states than in others. Respondent level commodity prices were
reviewed, and all were above city-gate prices. In aggregate, the prices
do look reasonable and believable, even in Pennsylvania.

(HOWEVER, THE EDITS WERE NOT ACTUALLY TESTED WITH REAL OR SIMULATED
DATA.)

[Price Estimates]{.underline}

The prices for both the Forms EIA-857 and the EIA-910 are based on total
revenues for all customers divided by total volumes during a given
month. (This is the customary approach for obtaining the volume-weighted
average price for most EIA surveys.) In Georgia, the taxes and
distribution charges are collected on the EIA-910. In other states,
taxes and distribution charges are collected on the EIA-857, and any tax
and distribution data that were supplied by EIA-910 respondents outside
of Georgia were ignored. The formula for the integrated price for each
state is the weighted average of the 857 and 910 prices, with the
weights determined by the 857 volumes transported and sold. Appendix C
contains this in more detail, but an important point is that the EIA-910
volumes are not used in the final weighting.

For the most part, the marketer price is lower for commercial, little
different for residential, but higher for both in Georgia.

**Table Two -- Prices (including distribution charges and taxes) for
calendar year 2002 and net impact of moving to an integrated price.**

  ------------------- -------- ---------- ---------- ----------- -----------
                      GA       MD         NY         OH          PA

  Residential 857     8.67     9.94       9.95       7.45        9.45

  910                 9.95     8.91       8.40       7.63        9.31

  Integrated          9.89     9.71       9.74       7.52        9.44

  Integrated - 857    +1.22    \- .23     \- .21     \+ .08      \- .01

                                                                 

  Commercial 857      6.53     8.28       8.13       6.88        8.54

  910                 8.25     6.18       5.50       5.95        6.00

  Integrated          8.10     6.81       6.51       6.29        7.42

  Integrated - 857    +1.57    -1.47      -1.62      \- .59      -1.12
  ------------------- -------- ---------- ---------- ----------- -----------

Dollars per mcf, Based on data in system as of 7-2-03

Tables 21 and 22 of the May 2003 Natural Gas Monthly (released on July
22) incorporate the integrated prices for the five states. Comparing the
April and May publications we are able to assess the impact on the U.S.
average price of having the 910 survey operating in the five states.
This shows that the net impact of moving to an integrated price for the
annual 2002 prices was an increase of 6 cents for Residential (from
\$7.79 to \$7.85 per mcf.) Since data for 2002 were revised in other
sates recently for unrelated reasons, we do not have the exact impact
for commercial. However, total change shows a decrease of 14 cents for
commercial (from \$6.70 to \$6.56 per mcf), which is somewhat impacted
by unrelated changes.

[Lessons Learned:]{.underline}

-   The initial form apparently was confusing to respondents in terms of
    the taxes and distribution, since many reported values here even
    though they were not in Georgia. The form was later modified to
    reduce confusion.

-   The volume differences in Pennsylvania illustrate once again the
    problems of dealing with new respondents in a rapidly changing
    industry. We did have problems with identical data being reported
    after two firms merged, and we may (or maybe not) have had data
    reported twice if sold through multiple marketers.

-   This is likely to be an evolving and challenging survey, and may
    require additional field-testing with selected respondents.

[Criteria for Changing Survey Coverage]{.underline}

**Expansion Criteria:** The following strategy is recommended for
deciding how to expand the EIA-910 to cover additional states. The
decision whether to expand the survey will be based on the availability
of additional resources.

Consider expansion in the commercial sector first, because the percent
off system for commercial is much higher than it is for residential. In
addition, the data from the current 910 shows that there are differences
in prices between on system sales and off system sales in all five
states surveyed. Hence, the potential biases in EIA commercial price
estimates are greater. Once states have been selected to be included in
the EIA-910 to improve commercial coverage, their residential coverage
is automatically improved. Finally, consider expansion in the
residential sector to make sure the few states for which coverage of the
residential prices is important are included.

**Commercial**

The recommended criterion is an assessment of the likely change in EIA's
estimate of prices paid by consumers in the commercial sector, or
equivalently the possible bias of EIA's current price data. Table A8
shows that the states with the highest percentage of commercial
off-system sales that are not currently in the EIA-910 are the District
of Columbia (80%), Illinois (58.9%), Florida (43.4%), Rhode Island
(42%), and New Jersey (40.9). All other states have percent off-system
of less than 40%, however even this percentage of off-system sales may
be leading to substantial biases in EIA price information. Georgia,
Maryland, New York and Pennsylvania all have price differences in the
neighborhood of \$2.50. Ohio has a price difference of about \$1.00

Under the assumption that there is a 2.50 price difference between on
system and off system sales; the bias in EIA's current commercial price
estimate would be about \$2.00 for the District of Columbia, \$1.47 for
Illinois, \$1.08 for Florida, \$1.05 for Rhode Island, and \$1.02 for
New Jersey. However, Ohio shows a price difference of only about \$1.00,
and if this were the case elsewhere the bias would be less. Tables A8
show that EIA's current state level commercial price estimates have a
*potential* bias of more than \$.50 for nearly 20 states, although the
*actual* bias in any state is currently unknown.

A reasonable approach is to go down the list of states in Tables A8 in
decreasing order of bias to add states to the EIA-910. Other important
information to consider is the number of marketers in a state that would
need to be surveyed, as well as the contribution of off-system sales in
that particular state to the U.S. total. Of the states currently not
covered by the EIA-910, Illinois, California, Michigan, and New Jersey
rank two, four, five, and six, respectively, in their contribution to
the U.S. volume of commercial sales. One reason to consider the volumes
of gas sold in the state is that larger volume states will have a
greater impact on the U.S. total price. However of these states Michigan
has the lowest percent off-system (36.5%) and has a likely price bias of
\$.36 to \$.91 in the commercial sector (Table Three). All of these
states are good candidates for inclusion in the EIA-910 on the basis of
potential bias at the state level.

**Table Three -- Commercial Candidates**

+-------------+-------------+-------------+-------------+-------------+
| J           | Volume of   | Rank by     | Percent of  | Rank by     |
| urisdiction | Off-System  | Volume      | Off-System  | Percent     |
|             | Sales in    |             | Sales for   |             |
|             | 2001        |             | 2001        |             |
|             |             |             |             |             |
|             | (mmcf)      |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Illinois    | 111,421     | 2           | 58.9        | 4           |
+-------------+-------------+-------------+-------------+-------------+
| New Jersey  | 55,889      | 6           | 40.9        | 9           |
+-------------+-------------+-------------+-------------+-------------+
| California  | 92,001      | 4           | 37.4        | 13          |
+-------------+-------------+-------------+-------------+-------------+
| Michigan    | 63,405      | 5           | 36.5        | 15          |
+-------------+-------------+-------------+-------------+-------------+
| Texas       | 26,191      | 10          | 14.7        | 33          |
+-------------+-------------+-------------+-------------+-------------+
| District of | 12,848      | 17          | 77.6        | 2           |
| Columbia    |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+

Source: Table 17, 2001 *Natural Gas Annual*

**Residential**

Tables A8 show that the states with the highest percentage of
residential off-system sales that are not currently in the EIA-910 are
the District of Columbia (24.62%), Nebraska (23.09%), Illinois (8.63%),
Virginia (8.31%), and Wyoming (7.39%). All other states have percent
off-system of less than 5%. Georgia (a special situation) has an average
price difference between the 910 and the 857 of \$2.40. For New York and
Maryland the price difference is somewhat less than \$2.00, and for Ohio
and Pennsylvania, the price difference is negligible.

Under the assumption that there is a \$2.00 price difference in the five
candidate states listed above; the bias in EIA's current residential
price estimate would be about \$.50 for the District of Columbia and
Nebraska, and \$.17 for Illinois, Virginia, and Wyoming (Tables A8).
However, the bias would be less if the price difference were less, and
two of our states showed essentially no price difference for
residential. The bias in the price estimates for other states would be
less than \$.10. Of these five states the District of Columbia, and
Illinois will most likely be included in the EIA-910 to capture
Commercial sector prices. Nebraska would be about 11^th^ to include in
the EIA-910 based solely on Commercial sector price. It may be
worthwhile to include Nebraska because it is needed in both residential
and commercial. This analysis indicates that biases in the commercial
sector data are the most important to address by expanding the EIA-910
survey.

It is also interesting to consider the states that have a high
percentage of natural gas customers participating in choice program.
Table Four shows the information for the five jurisdictions that are not
covered by the survey that have at least ten percent (or close to it) of
all gas customers in that state participating in a choice program.

**Table Four -- Residential Candidates**[^1]

+-------------+-------------+-------------+-------------+-------------+
| J           | Percent of  | Number of   | Percent of  | National    |
| urisdiction | 2001 Total  | Customers   | Total 2001  | Rank of     |
|             | Customers   | Pa          | Total       | Total 2001  |
|             | Eligible    | rticipating | Eligible    | Eligible    |
|             |             | in 2001     | Customers   | Customers   |
|             |             |             |             | Pa          |
|             |             |             | Pa          | rticipating |
|             |             |             | rticipating |             |
+-------------+-------------+-------------+-------------+-------------+
| District of | 100         | 26,438      | 19.5        | 4           |
| Columbia    |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Virginia    | 57.8        | 81,042      | 8.6         | 8           |
+-------------+-------------+-------------+-------------+-------------+
| Michigan    | 47.6        | 332,244     | 11          | 7           |
+-------------+-------------+-------------+-------------+-------------+
| Wyoming     | 37.2        | 48.339      | 37.2        | 2           |
+-------------+-------------+-------------+-------------+-------------+
| Nebraska    | 15.4        | 73,228      | 15.4        | 6           |
+-------------+-------------+-------------+-------------+-------------+

> **Source**:
> <http://www.eia.doe.gov/oil_gas/natural_gas/restructure/state/us.html>

Michigan and Virginia each have six active marketers, the District five,
and Nebraska and Wyoming, four. The District has completed District-wide
unbundling. Virginia is in the process. Michigan, Nebraska, and Wyoming
are in the pilot/partial unbundling stage. (Without checking out the
lists for each of these states, our guess there is marketer overlap
between the District and Virginia and maybe Nebraska and Wyoming.)

**Deletion Criteria:** If the Natural Gas Division decided upon
expansion criteria, then it could use the same criteria to decide
whether to delete a state from the EIA-910 survey. However, at the
present time, of the 5 states in the sample, Ohio would have the
smallest price bias if it were dropped from the EIA-910. The residential
prices would not change appreciably because there is little difference
between on-system and off-system prices. If the EIA-910 survey was
discontinued in Ohio, commercial prices in Ohio would have a bias of
\$.58. Even though Ohio has a high percentage of off-system sales
(58.2%) the price difference is relatively small (\$1.06). Because of
the high percentage of off-system sales, the possibility of changing
prices, and the difficulty of starting up the EIA-910 once it is
dropped, it we think that it is premature to exercise the deletion
criteria at the present time.

[Tables and Figures]{.underline}

This is a subset of a larger report, and only some of the tables and
figures are contained here, but they were NOT renumbered.

-   Table A2 - possible bias -- entry is simple product of row and
    column.

-   Table A8 -- two pages possible bias for residential and commercial.

-   Figures 16 and 17 -- price comparison by month, for residential and
    commercial

-   Figure 30 - plot of total volume of natural gas vs percent
    off-system for commercial

Appendix C contains formulas.

[Questions for the Committee:]{.underline}

-   How to select new states. Tables of bias present possible impact on
    integrated price, but need to guess at price difference. Any ideas
    for estimating price difference between utility and marketer in a
    state?

-   Do people want state-level prices? Or does it need to be a smaller
    area?

-   Should EIA show both 910 and 857 prices, or is the average OK?

-   Variance calculations treats 910 as a constant. Is this OK?

Appendix A -- Tables

Table A2

Bias Table

![](media/image1.wmf){width="5.99375in" height="4.842361111111111in"}

Appendix A -- contd.

Table A8

Ranked States Residential

![](media/image2.wmf){width="5.995833333333334in"
height="8.483333333333333in"}

Appendix A -- contd.

Table A8 -- contd.

Ranked States Commercial

![](media/image3.wmf){width="5.995833333333334in"
height="8.483333333333333in"}

Appendix B -- Figures

Only three figures are present here : 16, 17, and 30

![](media/image4.wmf){width="5.995138888888889in"
height="4.097222222222222in"}

![](media/image5.wmf){width="5.99375in" height="4.102777777777778in"}

> Appendix B -- contd.
>
> ![](media/image6.wmf){width="5.995138888888889in"
> height="4.097222222222222in"}
>
> Appendix C -- Formulas for Prices
>
> This appendix presents the formulas used for computing the prices.
> This is similar to appendix C of the May 2003 *Natural Gas Monthly*,
> which includes integrated prices in Tables 21 and 22 for the 5 states
> covered by the EIA 910 survey.
>
> 857 Transportation Price = 857 Transportation Revenue / 857
> Transportation Volume
>
> 857 Sales Price = 857 Sales Revenue / 857 Sales Volume
>
> 910 Commodity Price = 910 Sales Revenue / 910 Sales Volume
>
> 910 Distribution Charge = 910 Distribution and Taxes / 910 Volume
>
> Marketer price for all states except Georgia :
>
> 910 Commodity Price + 857 Transportation Price
>
> Marketer price for Georgia:
>
> 910 Commodity price + 910 Distribution charge
>
> Percent On-System Sales = 857 Sales Volume / 857 Total Volume
>
> Percent Off-System Sales = 1 -- Percent On-System Sales
>
> Integrated price = (Percent On-System Sales \* 857 Sales Price)
>
> \+ (Percent Off-System Sales \* Marketer Price)
>
> The standard error calculation treats the 910 data as constant, and
> only reflects the sampling error of the 857 data. This is in keeping
> with usual EIA practice, and is the traditional textbook approach.

[^1]: