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NIPSCO, Bay State Combining Portfolios

NIPSCO, Bay State Combining Portfolios

In an effort to capture the rewards and pass along savings made possible by performance-based rates, NIPSCO Industries and its new affiliate Bay State Gas are combining gas supply operations. The Midwest and New England LDCs manage firm loads of about 500 MMcf/d and most of that will be procured on the daily spot market in the future, said NIPSCO's Dan Gavito, vice president of corporate gas supply.

The promise of savings through combining supply management operations was one of the major points publicized by the Massachusetts Department of Telecommunications and Energy in its approval of NI Inc.'s purchase of Bay State last November. The NIPSCO parent completed its $780 million purchase of Westborough, MA-based Bay State on Feb. 12. The companies hope to save as much as $1 million/year through combined portfolio management, according to one source.

Gavito said the companies look to take advantage of arbitrage opportunities that are occurring between major hubs where they buy most of their gas. He said as much as 98% of their gas supplies will be procured on the daily market. "Many of BayState's gas supply contracts are long-term in nature (four months to a year) and are beginning to roll off. We're going to start purchasing a lot of the gas on a daily basis and avoid some of the reservation charges that are associated with that," he said.

"We'll do a lot of trading at the hubs and potentially eliminate some long-haul capacity all the way back to the field areas. We'll be releasing a lot of the capacity that we have and packaging it for other users. As [long-term pipeline] contract roll-overs occur, we'll take a hard look at whether that capacity continues to bring value to our customers." Gavito would not say how much long-term capacity could be turned back, but he did indicate any turn-backs likely would occur on Gulf Coast lines potentially to make room for additional capacity on PNGTS and Maritimes.

The Portland Natural Gas Transmission system came on line this month, bringing about 150 MMcf/d of additional Canadian gas into New England, and NI is a part owner. "[PNGTS] enables Bay State to take advantage of additional Canadian supplies and storage in Michigan. NIPSCO also utilizes storage in Michigan, which is another way we can combine the two portfolios."

Gavito also noted NIPSCO and Bay State utilize the same supply basins, many of the same pipelines and hold positions at the Moss Bluff and Egan salt cavern storage facilities which connect with major interstate pipelines in the Gulf Coast region. They plan to take advantage of those similarities in attempting to achieve cost savings in their supply portfolios, he said.

Bay State Gas, which serves 305,000 natural gas customers in Massachusetts, New Hampshire, and Maine. NIPSCO serves 660,000 gas customers in 30 Indiana counties.

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