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KeySpan Helps Struggling Corning Natural Gas with Winter Supply

The New York State Public Service Commission (PSC) announced an interim plan Tuesday to address inadequate winter gas supply preparations by state utility Corning Natural Gas, which serves 14,500 gas customers in a 400-square-mile gas distribution territory in the Finger Lakes area of New York. The PSC reported that KeySpan Corp. has submitted a letter of commitment to ensure that Corning has sufficient flowing gas and gas in storage to serve its customers for the month of December.

The interim arrangement is expected to be followed up by a long-term voluntary agreement for the remainder of the heating season. However, negotiations are continuing.

"At the public forums last week, staff heard firsthand customers' concerns regarding Corning's ability to provide natural gas this winter," said Commission Chairman William M. Flynn. "I am pleased that staff's hard work with the company and other utilities has now ensured adequate supplies through December, and I commend KeySpan for voluntarily stepping up to the plate to provide immediate assistance.

"I am encouraged by the progress to date, and I ask all of the parties involved to continue their intensive efforts to ensure that we have a voluntary mutual aid agreement to provide gas supplies for the entire heating season as soon as possible."

Discussions on the problem have taken place over the past three weeks. Last month, the Commission took the "extraordinary actions" of calling on other gas companies in the state to provide supply to Corning on a mutual aid assistance basis, and ordered Corning to show cause why a temporary operator should not be appointed for the utility (see NGI, Oct. 31; Nov. 14). The utility company failed to fill storage last spring and early summer when prices were much lower and then ran into a cash flow problem as gas prices rose into the late summer and shot sharply higher following the hurricanes.

In a letter sent to PSC Chairman Flynn on Monday, KeySpan said it has been in discussions with Corning and its lender, Community Bank, regarding adequate security to support gas purchases for the winter. KeySpan said it has been assured that adequate security will be provided and the companies are working to finalize necessary documents.

"We remain optimistic that the security arrangements can be implemented before Dec.1. Regardless of the status of these arrangements, KeySpan will commit to purchasing Corning's flowing gas requirements for December 2005 at a minimum," said KeySpan's Steven L Zelkowitz.

"In addition, Corning has requested that KeySpan assist it by stepping in as the nominal owner of gas held in storage by a third-party marketer, which would permit Community Bank to make available to Corning a necessary line of credit." KeySpan said it would do so for the month of December. "In any event, KeySpan commits to meeting the firm requirements of Corning's customers for the month of December that would otherwise be met by the third-party storage (i.e., 95,000 Dth), whether through flowing supply or purchase from storage."

The commission said staff would continue to monitor and facilitate negotiations as necessary. "The combination of a comprehensive mutual-aid agreement for gas supplies with KeySpan and restoration of Corning's credit line should be sufficient to provide the gas supplies and other working capital needed through the 2005-2006 winter heating season," the PSC said in a statement.

"As a backstop solution in the absence of a voluntary agreement, staff will continue to examine the possibility of the commission requiring other gas companies to provide gas to Corning. However, based on the progress made so far, as demonstrated by KeySpan's letter of commitment, the commission is optimistic that a voluntary and comprehensive mutual aid agreement can be reached."

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