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Regulator Makes Case for Gas Lines Over New Power Transmission

Regulator Makes Case for Gas Lines Over New Power Transmission

Gas pipeline industry lobbyists are missing an excellent opportunity to promote greater expansion of the pipeline network, Commissioner Brent Alderfer of the Colorado Public Utilities Commission said at the annual conference of the Colorado Oil and Gas Association earlier this month. The power industry apparently has overlooked the relative ease and economic advantage of building new gas pipelines and distributed generation to constrained areas compared to constructing remote generation and new power transmission lines, said Alderfer.

The role of gas pipelines in serving the generation market should be viewed in a new light as the power industry and those that regulate it struggle to understand recent reliability problems and price spikes, he noted. The focus in the power industry has been on building new transmission, opening up the power grid and installing ISOs. But in many cases, that either won't solve existing constraint problems, or in the case of building more transmission, is politically and environmentally difficult.

"The national debate on electric markets, market power, reliability and Independent System Operators needs to include pipeline additions and distributed generation as competitive alternatives to exclusive service with new electric transmission lines," said Alderfer.

According to his calculations there is a clear cost advantage in building gas lines to gas-fired power plants rather than new power line from remote plants. Under one example, which he cited, a company would have a choice of two construction scenarios: 1) build a remotely located 400-MW combined cycle gas-fired power plant at cost of $600 per kilowatt ($240 million), a $4 million switchyard, a new 300-mile (345KV) transmission line at $333 k/mile (or $100 million); or 2) build a 300-mile 24-inch diameter gas line (250 MMcf/d or the equivalent of 3,200 MW) with compression at a cost of $500,000/mile ($176 million), and build 4.5 new 400 MW combined-cycle gas-fired power plants and switchyards at the end of the pipe located near the demand center. The first scenario would result in a delivered power rate of 3.35 cents/kWh at $2/MMBtu for gas supply. But the second scenario would be 0.51 cents/kWh cheaper with a power rate of 2.84 cents/kWh.

"If you compare the cost efficiencies, uses and community appeal of natural gas pipelines versus electric transmission, [gas wins hands down]," Alderfer said.

Rocco Canonica

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