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Southeastern Electric, Gas Cooperatives, Munis Issue RFP for Long-Term LNG Supply

Looking to get in on the liquefied natural gas (LNG) wave to the U.S., a group of southeastern U.S. rural electric cooperatives and municipal gas utilities have aggregated a portion of their gas loads for a request for proposals (RFP) to acquire long-term supplies of LNG.

Issued on April 15 by their Global Energy Decisions consultant, Alabama Electric Cooperative Inc. (AEC), Seminole Electric Cooperative Inc., South Mississippi Electric Power Association (SMEPA) and Southeast Alabama Gas District (SEAGD) are seeking proposals for baseload aggregated volume at a fixed price for a minimum of 10 years.

The aggregated buyers said they are issuing one RFP and are conducting an aggregated procurement process to create an "efficient process" for both buyers and sellers of LNG. The group said the process will lead to a short list as early as Aug. 1 and selection of one or more respondents for competitive negotiation by the end of August.

At the end of the RFP process, if agreements are successfully negotiated, one or more sellers may have separate long-term agreements with one or more of the aggregated buyers. Each of the aggregated buyers will manage (contract for, schedule, nominate) its own individual gas requirements with the selected LNG provider. Approvals of definitive agreements by the utility boards of directors are targeted for January 2006.

Under the RFP, the aggregated buyers are proposing to buy an aggregated volume of regasified LNG -- delivered into the Florida Gas Transmission and other specified gas pipelines -- that could range from approximately 45,000 MMBtu/d to 175,000 MMBtu/d, depending upon negotiated prices and other terms. The RFP requests that potential suppliers provide separate price bids, first, for baseload volumes with no flexibility and, second, for baseload volumes with a variety of flexibility elements, such as monthly or annual tolerances. The group noted that each proposal must include a bid for a flat fixed price for at least a ten-year term; the buyers will also consider other price alternatives.

By aggregating and buying long term, the group said it hopes to establish price certainty for a known portion of their baseload requirements. In addition, the aggregated buyers hope to maintain optimum volume flexibility, introduce supply diversity into their portfolios, and form a long-term partnership with an entity desiring a long-term contractual anchor for existing or new LNG capacity in the southeastern U.S.

The group noted that it represents "a desirable market that is large, long-term, stable and creditworthy." In addition, the buyers pointed out that they are not regulated by state utility commissions, so long-term agreements do not face possible regulatory disallowance.

The electric cooperatives (AEC, Seminole and SMEPA) purchase gas for electricity generation in Alabama, Mississippi, and Florida. SEAGD provides wholesale gas sales service and owns the transmission and distribution infrastructure that is used to provide service to consumers in and around 14 member municipalities, 13 other towns, and unincorporated rural areas in the southeastern quadrant of the State of Alabama.

The group said a pre-proposal conference will be held in Houston on May 11 from 9 am to noon CT to review the RFP and answer respondent questions. The conference is open only to respondents who have signed the buyers' confidentiality agreement. Consultant Global Energy Decisions has sent the RFP to identified LNG suppliers, but suppliers who have not received the RFP are encouraged to contact Ann Donnelly (, director of Strategic Consulting for Global Energy Decisions.

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