With the opening of expanded natural gas storage anddeliverability last week at jointly owned Jackson Prairie in thesouthwest part of Washington state, interstate pipelines likeWilliams’ Northwest and Kern River are trying to develop more andbetter services to gas-fired electric generation plants which areexpected to proliferate across the U.S. landscape in the early 21stCentury.

The aquifer storage site that is owned equally (one-third each)by Northwest, Puget Sound Energy and Avista, completed a $30million expansion that added 3 Bcf of working capacity, for a totalof 18 Bcf. The withdrawal rate also increased by 300 MMcf/d ofwithdrawal to 850 MMcf/d through new and expanded wells andcompression at the 2.5-square-mile field.

“We’ve retained our one-third (1 Bcf and 100 MMcf/d ofwithdrawal) in the name of Northwest for operational and balancingpurposes,” said Kirk Morgan, Salt Lake City-based businessdevelopment director for Williams’ Kern and Northwest Pipelines.

“That gives us the ability to offer some very flexible balancingservices that are attractive to power generators. I’d love to havethat type of storage down on Kern (River in California) right now.It’s market area storage. But we’re not connected to storage downthere at present.”

Morgan, lamenting the monopoly power that Southern CaliforniaGas maintains on gas underground storage in the southern half ofthe state, said the ongoing settlement talks as part of the state’sgas industry restructuring could eventually allow Kern River tooffer more flexibility to new power generators since unbundledstorage 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 moreflexibility to the end-user and a greater ability to manage theirday-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 twogeneration customers in Texas, and it would offer it to more ofthem, but the others are still under long-term contracts. “Butlooking forward, we expect all of the 10 new generators that wemight serve [in Texas] to take the hourly service because it worksso well for them to shape their loads,” said Sandy McDonough, aPortland, OR-based vice president and spokesperson for PG&ETransmission.

Also, on Oct. 28, PG&E received FERC approval for itsnorthwest transmission system to begin offering negotiated rates,meaning that “we’re on the road to providing more flexibility forcustomers,” McDonough said. “Just like everyone else, we’retailoring our services to each [generation or large industrial]customer’s needs. “It basically allows us to go below the minimumsand over the maximums so we can have the flexibility to shape therates to suit the customer. And that pretty much permits charging alittle more in the demand charge and a little less on thecommodity, or vice versa, so you come up with a package that workswell for customers, particularly our generation customers.”

Similarly, Morgan said Kern River plans to exploit itsefficiency advantages as a relative new, state-of-the-art systembuilt in the early 1990s. He rates its relative efficiency at: 1.1%supplies lost in transport; compared to El Paso Natural’s 5% andTranswestern’s 4.75%. “That ends up being a 7 to 7.5 cents/Mcfprice advantage,” Morgan said. “We’re a real-time pipeline. Everybit of our measurement is electronic and communicatedinstantaneously via satellite to our gas control center.” Williams’two interstate pipelines in the West have formed an internal studygroup that is currently assessing its options for developing more”power friendly types of services,” including addressing the areasit thinks generators are most concerned about: (1) price, (2)pipeline pressure and (3) flexible receipt and delivery points fortheir natural gas supplies, Morgan said.

He said Kern’s “term differential rates” (TDR), for which itwill apply to FERC by the end of the year, will be part of its”low-price” offering to generators, offering a 37% decrease incurrent rates for customers who want to extend contracts for fiveand 10 year terms. Kern also hopes to have FERC approval soon onits proposal to vary from a straight fixed variable rate by movingsix cents of its demand charges to a commodity charge.

With more rate flexibility, options on receipt and deliverypoints and flexible balancing/peaking services, Morgan said Kernhopes to get more generators to see the advantages of connectingdirectly to its pipeline and bypassing local LDCs. It also offerthem options for dealing with their contracted gas capacity duringnon-burn times, which all power plants experience no matter howhigh their load factor, he said.

“Real-time access to information is critical to generators, andKern River can expand very cheaply. It would drive rates furtherdown for all shipper. We’re also very bullish on Rocky Mountaingas prices staying down for the short- and medium-term. We thinkKern River is in a sweet spot right now.”

Richard Nemec, Los Angeles

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