Aquila Energy landed a whopper supply deal last week withChicago-based ComEd, one of the largest electric utilities in thecountry. The contract is for up to 625,000 Dth/d and Aquila said itis the largest single natural gas contract that has ever beenarranged in the energy industry. Although terms of the one-yeartransaction were not released, marketing sources and NGI’s pricingstaff confirmed the deal is tied to NGI’s Chicago cash index, oneof the most widely used indexes in the industry.

“The players are becoming bigger and bigger, and this is exactlywhere it’s going. There are a lot of these very large contracts outthere, but there are not a lot of companies that can serve them,”said Aquila’s Mark Gurley, senior vice president and generalmanager.

“There’s probably only one or two other companies in the countrythat we think could come close to performing on a contract likethis,” he said. Aquila is able to handle a daily delivery of thismagnitude – which could be used to generate enough power to heat orcool 17,000 homes – “because of the breadth of our physical tradingbusiness with respect to our Gulf Coast, Midcontinent and Canadianvolumes. We’ll be relying on everything. This contract is going torequire us to be extremely liquid and very versatile.”

On an average day the deal will require 200,000-400,000 Dth/d toserve ComEd’s peaking facilities in the greater Chicago area,principally as swing gas for the 2,698 MW Collins GeneratingStation, the largest gas/oil fueled generating plant in thecountry.

“Volumes for volumes sake are not important, but what isimportant is liquidity and to some extent moving a lot of volumegives you physical liquidity allows you to: one, take advantage ofall the arbitrage the market has; and two, to be able to servelarge customers with varying demand more efficiently that someoneelse could with smaller volumes.”

Gurley said ComEd’s demand had been served by multiple “middlemen” suppliers who actually had been relying on Aquila’s liquidity.”All we’re really doing is taking the middle man out of thepicture.” A ComEd spokesman said Dynegy previously had suppliedmost of the gas covered by the Aquila deal.

Aquila is the fourth largest gas marketer based on volume andthe second largest power marketer. It serves more than 15,000industrial, utility and commercial customers across the US andCanada, marketing an average of 10.8 Bcf/d and 44 million MWh inthe first quarter of 1999. ComEd provides service to more than 3.4million customers across Northern Illinois, or 70% of the state’spopulation.

Rocco Canonica

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