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Ranking Shows 'Scrambled' Pipe Capacity Trader Lineup

The volume of gas pipeline capacity traded January through August by the top players increased dramatically over the same period of 2008, according to Boston-based Capacity Center. The top 20 companies for activity have also changed dramatically over the past year, the firm said last Tuesday, citing upheaval in financial markets as one reason for the shift.

The new No.1 for 2009 is Tenaska Energy with a 159% jump in the number of deals completed and a 133% increase in daily volume traded. Last year's No. 1, Merrill Lynch, has dropped out of the top 20 in 2009. There has been more shifting among the top 20 than at any time in the past 10 years, the firm said, noting that a dozen companies entered or exited the top 20 in 2009.

"When the price caps came off capacity release deals last summer [see NGI, Nov. 24, 2008; Sept. 15, 2008], we expected some amount of shifting as certain companies have aggressively taken advantage of the new rules," said Capacity Center President Greg Lander. "Adding the financial market's upheaval, demand destruction, huge commodity price swings since last year and packed storage, it's no surprise that the rankings have been scrambled."

New additions to the top 20 include Fina Natural Gas Co. (12), Atmos Energy Marketing (14), The Energy Authority (15), JP Morgan (18), AIG Trading Corp. (19) and Texla Energy Management (20).

Among those dropping out of the top 20 are Oneok Inc., Sempra Energy, Reliant Energy, Louis Dreyfus and ArcLight Capital Partners.

The three biggest ranking gainers were AIG, which jumped 381 places; The Energy Authority, which leaped 216 places; and JP Morgan, up 140 places.

Total traded capacity volume for the top 20 as a group was up 27% over the same period in 2008. Of the top 20, all but two had increased activity ranging from 6% to more than doubling from 2008 levels. The top 20 break down into three entity types: wholesalers/traders, retailers and asset managers. The current No. 1, Tenaska, did 20% more volume than No. 2, Hess Corp., yet Hess did almost twice as many deals. This disparity in traded volume versus deal volume is typical of the difference in approaches between wholesale and retail capacity release players, Capacity Center said.

The capacity release benchmarking report utilized Capacity Center's database of all the capacity release deals done on every interstate pipeline. Ranking data excluded volumes traded due to acquisitions and between related nonregulated affiliates; however, the ranking does include trades between regulated entities and their nonregulated affiliates.

Federal Energy Regulatory Commission Order 712, finalized in June 2008, permanently removed the rate cap on capacity-release transactions of one year or less. But it did not lift the rate ceiling on long-term capacity releases of more than one year or on primary sales of capacity by pipelines (see NGI, June 23, 2008).

Last month Capacity Center reported that daily capacity releases during the first eight months of this year rose 25% to 10,964,866 Dth/d from 8,771,045 Dth/d for the comparable period in 2008. The number of releases increased 17% to 17,972 during the first eight months of this year from 15,360 for the same period in 2008 (see NGI, Sept. 28). Another survey by the firm earlier this year found that local distribution companies were profiting less from capacity release activity than other market participants (see NGI, March 9).

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