Western Pipelines Gear Up to Serve Generators
With the opening of expanded natural gas storage and
deliverability last week at jointly owned Jackson Prairie in the
southwest part of Washington state, interstate pipelines like
Williams' Northwest and Kern River are trying to develop more and
better services to gas-fired electric generation plants which are
expected to proliferate across the U.S. landscape in the early 21st
The aquifer storage site that is owned equally (one-third each)
by Northwest, Puget Sound Energy and Avista, completed a $30
million expansion that added 3 Bcf of working capacity, for a total
of 18 Bcf. The withdrawal rate also increased by 300 MMcf/d of
withdrawal to 850 MMcf/d through new and expanded wells and
compression at the 2.5-square-mile field.
"We've retained our one-third (1 Bcf and 100 MMcf/d of
withdrawal) in the name of Northwest for operational and balancing
purposes," said Kirk Morgan, Salt Lake City-based business
development director for Williams' Kern and Northwest Pipelines.
"That gives us the ability to offer some very flexible balancing
services that are attractive to power generators. I'd love to have
that type of storage down on Kern (River in California) right now.
It's market area storage. But we're not connected to storage down
there at present."
Morgan, lamenting the monopoly power that Southern California
Gas maintains on gas underground storage in the southern half of
the state, said the ongoing settlement talks as part of the state's
gas industry restructuring could eventually allow Kern River to
offer more flexibility to new power generators since unbundled
storage and various balancing proposals are "on the table."
Netting and trading imbalances, along with pooling arrangements,
could emerge in future settlements.
"All of those things in one form or another provide more
flexibility to the end-user and a greater ability to manage their
day-to-day usage," Morgan said.
"In general, we want to make the [Kern and Northwest]
pipeline[s] as friendly to electric generation as we can."
PG&E Gas Transmission offers hourly service to two
generation customers in Texas, and it would offer it to more of
them, but the others are still under long-term contracts. "But
looking forward, we expect all of the 10 new generators that we
might serve [in Texas] to take the hourly service because it works
so well for them to shape their loads," said Sandy McDonough, a
Portland, OR-based vice president and spokesperson for PG&E
Also, on Oct. 28, PG&E received FERC approval for its
northwest transmission system to begin offering negotiated rates,
meaning that "we're on the road to providing more flexibility for
customers," McDonough said. "Just like everyone else, we're
tailoring our services to each [generation or large industrial]
customer's needs. "It basically allows us to go below the minimums
and over the maximums so we can have the flexibility to shape the
rates to suit the customer. And that pretty much permits charging a
little more in the demand charge and a little less on the
commodity, or vice versa, so you come up with a package that works
well for customers, particularly our generation customers."
Similarly, Morgan said Kern River plans to exploit its
efficiency advantages as a relative new, state-of-the-art system
built in the early 1990s. He rates its relative efficiency at: 1.1%
supplies lost in transport; compared to El Paso Natural's 5% and
Transwestern's 4.75%. "That ends up being a 7 to 7.5 cents/Mcf
price advantage," Morgan said. "We're a real-time pipeline. Every
bit of our measurement is electronic and communicated
instantaneously via satellite to our gas control center." Williams'
two interstate pipelines in the West have formed an internal study
group that is currently assessing its options for developing more
"power friendly types of services," including addressing the areas
it thinks generators are most concerned about: (1) price, (2)
pipeline pressure and (3) flexible receipt and delivery points for
their natural gas supplies, Morgan said.
He said Kern's "term differential rates" (TDR), for which it
will apply to FERC by the end of the year, will be part of its
"low-price" offering to generators, offering a 37% decrease in
current rates for customers who want to extend contracts for five
and 10 year terms. Kern also hopes to have FERC approval soon on
its proposal to vary from a straight fixed variable rate by moving
six cents of its demand charges to a commodity charge.
With more rate flexibility, options on receipt and delivery
points and flexible balancing/peaking services, Morgan said Kern
hopes to get more generators to see the advantages of connecting
directly to its pipeline and bypassing local LDCs. It also offer
them options for dealing with their contracted gas capacity during
non-burn times, which all power plants experience no matter how
high their load factor, he said.
"Real-time access to information is critical to generators, and
Kern River can expand very cheaply. It would drive rates further
down for all shipper. We're also very bullish on Rocky Mountain
gas prices staying down for the short- and medium-term. We think
Kern River is in a sweet spot right now."
Richard Nemec, Los Angeles