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TransCanada Insulates Yankee from Supply Risk

TransCanada Insulates Yankee from Supply Risk

The substantial energy management outsourcing relationship between New England gas distributor Yankee Gas and energy marketer TransCanada Gas Services continues to grow. After a competitive bidding process, Yankee signed a new one-year contract that allows TransCanada to manage another large part of Yankee's gas supply, storage and long-haul pipeline capacity.

It is the second supply management arrangement the two companies have signed. In 1998, they agreed to a similar deal, which is still in place (see NGI, Oct. 26, 1998). In total, TransCanada now controls 88% of Yankee's gas supply portfolio.

"By having TransCanada manage all of our supply, capacity, storage and citygate needs, we can optimize our assets while realizing substantial cost savings - and that's good for our customers and our shareholders," said Dennis E. Welch, COO of Yankee Energy System, parent of Yankee Gas. "TransCanada has a proven track record with Yankee and that it important [in] assuring our customers a reliable and cost effective gas supply in today's rapidly changing commodities market."

This new contract calls for TransCanada to manage about 3.2 Bcf of Yankee's gas storage on the Texas Eastern (Tetco) and Dominion Transmission pipeline systems. It also calls for TransCanada to provide Yankee's supply requirements on Tetco and manage Yankee's 109,000 MMBtu/d of transportation capacity on Tetco, Dominion and Algonquin pipeline systems. Under their existing agreement, TransCanada already manages 55,000 MMBtu/d of Yankee's gas supply and firm transportation capacity on Tennessee Gas Pipeline, as well as 2.8 Bcf of its storage capacity on Tennessee and 40,000 MMBtu/d of firm capacity on Iroquois Gas Transmission.

"We've done a lot with TransCanada and they have served us very well from a reliability perspective," said Marc Andrukiewicz, Yankee's director of gas management. "These agreements that we do with them tend to insulate us from both supply and price risk of the marketplace. And the mechanisms of the contracts allow us to share the benefits of them with our ratepayers." There's a mechanism that provides a reimbursement to Yankee and its customers for the value of the capacity that is not utilized by Yankee during off-peak hours, he said.

"I would classify the arrangement as extremely successful for supply and price risk mitigation," Andrukiewicz added. "The obligations of TransCanada are to provide the gas when we call for it. We have tremendous flexibility as an LDC with that. We're able to estimate our usage on a daily basis and simply call on that supply for the day."

TransCanada now manages all of Yankee's Gulf Coast supply on the Tetco and Tennessee Gas systems and provides a substantial amount of Canadian gas to Yankee at the Niagara import point on both Tennessee and Iroquois.

Yankee, a subsidiary of Northeast Utilities, is the largest gas distributor in Connecticut, serving more than 185,000 customers.

Rocco Canonica

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