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Marketer in Hedging Dispute With Anadarko
Mountain Energy Corp., a gas marketer in Kansas City, MO, said last week it has had to ask about 10% of its customers to convert their fixed-priced supply contracts to index-based arrangements for the remainder of their contract terms due to a "major dispute" with Anadarko Energy Services over the "hedging of our accounts."
"At the end of that term, I will settle with them [customers] financially the difference between index and whatever the fixed price they might have had in their contract.....Many of the customers are probably going to owe me," said Rodrick Donovan, executive vice president and co-owner of Mountain Energy. The company, he added, also has offered to let the affected customers keep their September payments toward any settlement.
Donovan estimated that 62 of the company's 700 industrial and commercial supply accounts, which are primarily located in Missouri and Kansas, will be affected by the change in the supply contract terms. Anadarko Energy, the marketing arm of Houston-based Anadarko Petroleum, supplies Mountain Energy with about 1 Bcf/month of natural gas, he noted, adding that the 62 customers account for about 250 MMcf/month of that.
Both Mountain Energy and Anadarko declined to go into details about the flap. "As a matter of policy, we just don't discuss the details of our relationships with our customers," said Anadarko spokesman Tony Canino. "They [Mountain Energy] are a customer of ours," he confirmed, adding that the marketer receives service under a month-to-month arrangement rather than under a long-term contract.
As a result of the hedging dispute, Mountain Energy has alerted the 62 customers that effective Oct. 1 the contract price would change from the fixed price or cap price to "WNG index plus $0.02 per MMBtu."
Mountain Energy has given the affected customers the option to switch to other suppliers. In a Sept. 29 letter, the company suggested that utilities "may be a reasonable viable option for many customers, given the current market price of natural gas and considering the fact that the utility has been injecting lower priced gas for winter re-delivery." Donovan said about 10%, or 6-8 accounts, have elected to change suppliers, while the remainder of the 62 have chosen to stay with Mountain Energy.
"Given the higher prices going into the winter, the summer injection period allowed the opportunity for these utilities to inject $2.75, $3, and $3.25 gas. For the first time in a long time if ever, the cost of natural gas sales service [from utilities] will be very competitive" with the gas service provided by marketers, Donovan noted.
It "will require some time to bring closure" to the hedging dispute, the company said. In the meantime, Donovan said Mountain Energy is in the process of entertaining bids from other suppliers, and expects to make a change in supplier this month. Susan Parker
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