NGI The Weekly Gas Market Report / NGI All News Access

Western Pipelines Gear Up to Serve Generators

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 Century.

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 Transmission.

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

©Copyright 1999 Intelligence Press, Inc. All rights reserved. The preceding news report may not be republished or redistributed in whole or in part without prior written consent of Intelligence Press, Inc.

Comments powered by Disqus