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
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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