Denver Marketer Priced Out of Market

Western Natural Gas, a Denver-based marketing company, is phasing out its retail marketing business in the face of increasing natural gas prices and the capital requirements necessary to obtain supplies.

The escalating prices "have placed constraints on the ability of private companies to obtain operating capital needed to provide quality natural gas service," Western said in a press release issued yesterday after an article appeared in the Rocky Mountain News. "We have determined that continuing to service the retail market is not feasible and are in the process of phasing out of that arena. During this transition period, Western continues to explore options that will satisfy our existing retail customer base. We would like to stress that Western Natural Gas is still flowing gas to all of our customers --- and will continue to do so."

Lori Vining, Western's president, said the company is looking for a new supplier for its customers as a group. "We are not leaving them high and dry." Vining said the problems her company are facing are "no different than those facing others at these high price levels." She declined to say how many customers or how much gas, but confirmed they include some Denver school districts.

An industry source said he had been told there were about 100 customers and the volumes totaled between 15 and 20 MMcf/d.

Vining confirmed that the customers had the option of returning to service from Xcel Energy's distribution subsidiary, Public Service of Colorado. A spokesman there confirmed the distribution rates for commercial customers currently are $5.85 per MMBtu, but are expected to go up to $8.60 an MMBtu when the latest rate hike is approved by the state public utility commission.

John Talley, president of Proliance Energy in Indianapolis, denied a published report that it would buy out the retail business of Western Natural. Proliance "had some brief discussions in mid-December, but they were not successful. There was no agreement."

In the future, Western Natural said its focus will be on production and producer services, gathering, upstream technology and wholesale marketing.

Western's dilemma is the latest evidence of the financial squeeze put on marketers, large and small, by the high market prices, which are boosting credit requirements for those trading in the market. Several small marketers have already filed for bankruptcy.

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