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.
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