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FGT Loses Key Expansion Customers After Court Ruling

FGT Loses Key Expansion Customers After Court Ruling

Florida Gas Transmission (FGT) has advised FERC that marketers Enron North America Corp. and Dynegy Marketing and Trade have dropped out of its Phase V expansion project in the wake of a Florida Supreme Court decision in April that dealt a serious blow to the development of merchant power in the state.

The withdrawals of Enron and Dynegy could force FGT to significantly downsize its latest expansion plans, as the two marketers combined represented nearly 100,000 MMBtu/d of contract commitments. Enron had signed up for 50,479 MMBtu/d, while Dynegy had entered into a precedent agreement for 41,204 MMBtu/d.

The proposed firm capacity that the marketers had signed up for was tied to the construction of two new power plants --- Duke Energy's New Smyrna Beach facility and the Palmetto Power plant. But the Florida court threw merchant power construction in the state a curve ball when it held that state regulators were prohibited from authorizing the construction of new generation facilities whose output was not fully committed to use by Florida customers who purchase electrical power at retail rates.

Specifically, the court ruled the Florida Public Service Commission exceeded its authority by approving the need for the 514 MW New Smyrna Beach facility when only 30 MW of the plant's output would be dedicated to in-state use. The decision effectively blocks construction of a string of about 25 merchant power facilities that have been planned for the Florida market.

"Rehearing of this opinion has been sought; however, the matter is not expected to be resolved within the Phase V expansion schedule," FGT told FERC [CP00-40]. The proposed Phase V project, which would add 231 miles of new pipe and 400 MMcf/d of capacity to FGT's system, is targeted for completion by April 2002.

Although it had pulled out of the Phase V expansion, FGT said Enron has informed it that it wants to participate in the pipeline's next expansion, for which an open season is now being held. The Phase V expansion capacity that Enron had initially committed itself to the construction of the New Smyrna Beach facility.

Dynegy notified FGT by letter that it was exercising its termination rights for firm expansion capacity that was related to the Palmetto Power plant. The Houston-based marketer said it couldn't commit to the capacity "at this time," FGT said.

FGT noted it currently is negotiating with replacement shippers for the capacity returned by Enron and Dynegy. It said it plans to file an amendment to its Phase V expansion application at FERC on or before Aug. 1.

FGT said it already has decided to exclude a number of facilities from the Phase V expansion: 1) 29.8 miles of 16-inch line located in Volusia Country, FL; 2) 6.8 miles of 16-inch pipeline in Orange and Osceola Counties, FL; 3) 14.8 miles of 24-inch pipeline looping in Polk Country, FL; and 4) 8.2 miles of 24-inch pipeline looping in Hillsborough Country, FL.

Susan Parker

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