Document Type

Article

Journal/Book Title

OMEGA: International Journal of Management Science

Volume

24

Issue

5

Publisher

Elsevier

First Page

511

Last Page

522

Publication Date

10-1996

Creative Commons License

Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Abstract

Natural gas local distribution companies (LDCs) face the problem of managing natural gas purchases under conditions of uncertain demand and frequent price change. In this paper, we present a stochastic optimization model to solve this problem. Unlike other models, this model explicitly considers deliverability, the rate at which gas can be added to and withdrawn from a storage facility, as a variable, and considers its role in ensuring a secure supply of gas. Deliverability is often overlooked in gas supply planning, yet is a critical factor in achieving a secure gas supply. Using data from an LDC in Huntsville, Alabama, we show how this model can be used to minimize total cost while meeting constraints regarding the security of gas supply. We also demonstrate that security is dependent on the rate of deliverability, which in turn is affected by a number of factors including gas availability, storage and transportation considerations, and weather conditions.

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