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Washington Gas CEO: Utility Aims to Prevent Recurrence of System Leaks This Winter

In order to prevent a recurrence of the spate of leaks on its natural gas distribution system, Washington Gas Light (WGL) expects to complete construction in December of a facility that will mix heavier hydrocarbons with the regasified liquefied natural gas (LNG) stream flowing from Cove Point LNG's import terminal on the Maryland coast to the utility's system, said Chairman and CEO James DeGraffenreidt Jr. last Thursday.

The utility's "construction program [is] designed to take couplings out of play and simultaneously before the heating season, we are going to finish construction of an injection facility at our gate station that receives gas off the Cove Point [pipeline]," he told NGI following a speech to the Natural Gas Roundtable in Washington, DC.

Earlier this year, WGL began repairing 1,400 leaks in its distribution system at an estimated cost of about $144 million. The utility, which serves more than a million gas customers in the metropolitan Washington, DC, region and surrounding areas, attributed the rash of leaks to the chemical composition of the revaporized LNG that directly enters its distribution system in Prince Georges County, MD, from the Cove Point terminal.

"The drier nature of the gas [from the Cove Point terminal] has been identified by us as the cause," DeGraffenreidt said. "Neither the age [of the distribution lines] nor the ground temperatures could possibly explain this phenomenon." Richmond, VA-based Dominion Resources, which owns and operates the Cove Point terminal, disputes that conclusion. It believes the old couplings in the Washington Gas distribution system, which were installed between the 1950s and 1970s, were the primary cause of the leaks (see NGI, July 11).

On a parallel track, DeGraffenreidt noted that Washington Gas still was in "conversations" with Cove Point and the shipper of the regasified gas to "work out a solution that works for us."

Previously, DeGraffenreidt said concerns involving LNG centered around the effects it might have on customers at the burnertip. An agreement filed at FERC a few years back "reserved the opportunity to reopen [the document] if any other problems were discovered. So this is sort of a latent problem that nobody had previously encountered before."

DeGraffenreidt said Washington Gas also plans to have in service by the winter of 2008 a 1 Bcf peak shaving LNG storage facility at its complex in Chillum, MD, in Prince George's County, just outside of Washington.

The planned $80 million facility would have the capability to hold 10 days of gas supply, he noted. This facility, as well as the utility's existing storage assets in Virginia and Maryland, "all benefit customers because the alternative of making yourself more dependent on supply out of the Gulf of Mexico or more dependent on flowing pipeline gas that is subject to wide swings in price seems to be moving [us] in the opposite direction of where we need to go," DeGraffenreidt said.

He noted that Washington Gas currently is working with the Maryland Public Service Commission's engineering staff to develop a proposal for the 1 Bcf peaking storage facility.

DeGraffenreidt said the utility experienced little disruption following the two hurricanes. "We haven't seen any adverse impact on us other than price to date. After Katrina...everybody was curtailed for about a day and a half. We were back to normal delivery in about two days. And After Rita, I don't think we experienced any disruption."

But "that's only part of the story. It's not cold yet. And so timing has probably been a benefit from that point of view...Our storage is as full as we want it at this point in the year, and we're several weeks from any real cold weather...So by then, it becomes important to understand what the capabilities are out of the Gulf."

He said about 55% of the utility's winter gas supply is either hedged or in storage. DeGraffenreidt estimated the winter heating bills for gas customers in WGL's service territory, which also includes parts of Virginia and Maryland, will increase about 20-32%. That's going to have a "dramatic impact" on all customers, especially low-income ones. Energy is at the "core of the key pocketbook decisions by consumers," he noted.

While all utilities see an increase in bad debt when commodity prices go up, DeGraffenreidt said this was less so for the Washington metropolitan area because of the "affluence" of the region.

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