Kern River Offering Discounted TDR Rates
Williams' Kern River pipeline, with expansion plans targeting
Long Beach, CA, is holding an open season offering term
differentiated rates (TDR) for firm service representing a discount
from existing rates of up to 25 cents/Dth. The 15-day open season
began Oct. 23.
Under the TDR agreement, the contract term would determine the
transportation rate a customer would pay. Kern River is offering
rates of 10 years or longer. The 10-year option would yield a rate
between 47 and 52 cents/Dth. The 15-year option would yield rates
between 41 and 46 cents/Dth. Kern River's existing rate is 66
cents/Dth. The pipeline would consider contracts longer than
15-years as well, said Greg Snow, business development
During the open season, firm shippers will have the opportunity
to release existing capacity to satisfy new capacity commitments
before any expansion is built. If interest is shown in the TDR
options, Kern River will develop new rate schedules to take to the
Federal Energy Regulatory Commission for approval.
Kern River will maintain its current cost of service-based
levelized rate structure through 2007 for shippers not wanting to
extend their firm service contracts. Should existing capacity be
fully subscribed after restructuring existing commitments, Kern
River will expand its mainline. The pipeline can install additional
compression and expand its system. An expansion of 250,000 Dth
would lower the 15-year TDR rate option to 35 to 40 cents/Dth.
"We are interested in expanding our system to access new gas
markets emerging because of electric restructuring in California
and Nevada and new gas-powered generation facilities," said Kirk
Morgan, director of business development. "The ability to reduce
transportation costs by subscribing for one of the TDR options
increases the value of FT and helps position any Kern River shipper
to take advantage of new market opportunities."
While the new TDR rates would not be predicated on Kern River's
previously announced expansion into Long Beach, they could boost
interest in the expansion among shippers. Kern's first major
extension project since beginning operation in 1992 is a 150-mile
lateral extension to Long Beach (See NGI Sept. 28, 1998). The new
pipe would be 24- or 30-inches in diameter and would carry a
minimum of 300 MMcf/d. Kern had been spending a fourth year
studying a possible extension into the city when Questar snuck into
Long Beach this summer with a proposal to convert an existing oil
line to flow gas.
The Kern extension currently does not include a related upstream
expansion. Kern expects Long Beach to be an attractive new market
for existing throughput. "Right now we have a lot of volume moving
on a day-to-day basis fighting that spot market game," Snow told
NGI last month. "We're hearing you might be able to line up some
large base load customers with this."
Snow said existing shippers were receptive to the TDR rates when
Kern River presented them. However, the interest could stem from
their desire to release capacity, he conceded. Kern has contacted
some large potential shippers, "but it's really premature to try to
ascertain what the market interest might be right now."
For more information, call Snow, (801)584-7270.
Joe Fisher, Houston
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