Tenaska Inc. and Kiowa Power Partners LLC announced that construction will begin in early July on the Kiamichi Energy Facility, a 1,250 MW natural gas-fired, electric generating facility in Pittsburg County, OK, south of Kiowa. Omaha-based Tenaska will act as lead developer, taking responsibility for the project’s final-stage development, financing and construction. The facility will be located on a 100-acre site approximately three miles south of Kiowa, just west of U.S. Highway 69. When operational in 2003, the power generated will be able to meet the energy needs of more than a million homes, the companies said. BVZ Power Partners-Kiowa has been tapped to build the project.

Columbia Gas Transmission said it is putting another 180 miles of gathering and small transmission lines and 152 related measuring stations up for sale. The facilities, which the company said are not part of its core mainline transmission business, are located in West Virginia, Pennsylvania, Maryland and New York. Columbia has been selling packages of non-core, small diameter pipeline assets since 1996. Since that time it has sold or transferred 6,000 miles small pipelines. The facilities in this current sale include Line 138, the 8,000 system, the 8044 extension, and the Oakland, Letchworth and Shenango systems. Interested parties must make an appointment to view Columbia data room in Charleston, WV. For details call (304) 357-3122 or go to Columbia web site www.columbiagastrans.com/facilitysales . Written bids are due Aug. 17.

The Texas Public Utility Commission (PUC) affirmed that it has an abundant supply of electricity to meet this summer’s peak needs, but also warned that state electric customers should be prepared for higher electricity bills due to increases in natural gas fuel costs. With an expected peak demand of 67,000 MW, statewide capacity will be at least 83,000 MW, resulting in a 24% reserve margin. Although the state’s electricity supply is expected to be plentiful, the PUC said Texas customers may face higher electricity bills this summer than last summer because of higher natural gas costs. State law allows utilities to pass along higher fuel costs to customers as long as the utility makes no additional profit from the higher costs. Natural gas supplies more than 45% of the fuel to generate electricity in Texas. Utilities surveyed by the PUC indicate a statewide average increase of approximately 18% this summer over last for a typical household. Some customers can expect electric bills to increase as much as one-third this summer compared to last summer for the same amount of electricity.

PG&E National Energy Group completed a transaction for a new $550 million senior unsecured letter of credit and revolving credit facility. The facility, which closed on June 15, will be used primarily for letters of credit to support trading and for working capital requirements. J.P. Morgan Securities Inc. led the transaction as bookrunner and lead arranger. Societe Generale and Citibank participated as arrangers with Dresdner Kleinwort Wasserstein, ABN AMRO and Credit Lyonnais acting as co-arrangers. The all-in drawn pricing is 1.625% over LIBOR at the BBB level. “This transaction marks the conclusion of the National Energy Group’s effort to establish a credit identity that is independent of PG&E Corp. and signals the National Energy Group’s re-entry into the commercial bank market to support our trading and development efforts,” said John Cooper, the National Energy Group’s senior vice president of finance. Based in Bethesda, MD, PG&E National Energy Group–a subsidiary of PG&E Corp.–develops, owns and operates electric generating and gas pipeline facilities and provides energy trading, marketing and risk-management services.

In response to the recent decline in its common share price, Aquila, Inc. said there has been no material change in its business strategy or earnings outlook. The company noted that the FERC order on power price mitigation in the western states is not expected to adversely impact the company’s earnings or strategy. Aquila is an 80%-owned subsidiary of UtiliCorp United and had its initial public offering in April 2001.

Florida Power & Light announced the commercial startup of a 300 MW expansion of its Martin plant site near Indiantown, FL, and Lake Okeechobee in Martin County. The power from FPL’s new Martin plant-plus 900 MW of new generation from FPL’s Fort Myers plant-gives FPL a reserve margin of 20% this summer and the capability to serve an additional 255,000 homes and businesses. “There is no energy crisis in Florida,” said FPL President Paul Evanson. “This past week, in fact, we set a new record and comfortably met the highest-ever customer demand of 18,340 MW on June 13.” FPL’s new capacity additions are part of the company’s on-going expansion, which will ultimately see 6,300 MW of new capacity — a 33% increase — put into service to meet customer needs between now and 2010. FPL said construction is underway on an additional 1,450 MW of new generation in southwestern and central Florida that will be available to serve customers by 2003.

House Majority Whip Tom DeLay (R-TX) said in a statement that he is battling to save Eastern Gulf Lease Sale 181 as part of the FY02 Interior Appropriations Act. “Our long-term energy security requires us to seek out new sources of oil and natural gas… Lease Sale 181 has the potential to play an important role in strengthening our energy security. It could hold trillions of cubic feet of natural gas and billions of barrels of oil… Recently, we’ve seen fluctuations in the price of natural gas because supplies have run short… Lease Sale 181 can make natural gas prices lower and more stable. Some Members oppose exploration in this area because they’re concerned about environmental risks. That’s a reasonable and understandable concern. But we don’t face an either/or proposition. Lease Sale 181 can be explored safely.”

The Oklahoma Corporation Commission (OCC) has approved an order that helps defray higher summer electricity costs with more than $2.7 million in fuel cost credits for Oklahoma Gas and Electric Co. (OG&E) ratepayers. The customer credit amounts to 0.000138 cents per kilowatt hour or an average of 13.8 cents per month for the average residential electricity user’s bill. The customer credit is part of a stipulated agreement worked out between the OCC public utility division staff, OG&E, the state attorney general and Oklahoma Industrial Energy Consumers that applies to cost recovery for gas transportation savings that result from competitive bidding. Each OG&E customer will start seeing the credit with the July billing cycle and continue to receive it until amended by the company at the direction of the Commission.

Reliant Energy announced that it will build an 800 MW generating station in south central Pennsylvania. Three natural gas-fired units will be built adjacent to the company’s Hunterstown facility in Straban Township, five miles north of Gettysburg in Adams County. Three combustion turbines totaling 60 MW already operate on the site. The Pennsylvania Department of Environmental Protection on June 15 approved an air permit for the project to operate. Construction is expected to begin this month, with commercial operation scheduled for mid-year 2003. The facility is the second project in Pennsylvania to be announced by Reliant this year. The company broke ground last week for a 520 MW, clean-coal technology project at its Seward power plant site in Indiana County.

Calpine Corp. and Bechtel Enterprises Holdings Inc. announced that a proposed decision by the California Energy Commission (CEC) on June 18 recommends approval of the 600 MW, gas-fired Metcalf Energy Center. The decision by CEC Commissioner Robert A. Laurie and Chairman William J. Keese, the two members who have presided over 24 months of public hearings on the Metcalf Energy Center application, will be considered by all five CEC members in August, following a 30-day public comment period. In the meantime, developers Calpine and Bechtel have ordered equipment and are prepared to begin construction as soon as possible. Construction is estimated to take 24 months. The project, originally planned for completion by next summer, is now planned to be online during the summer of 2003. San Jose Mayor Ron Gonzales recently reached a compromise with plant developers and withdrew his opposition to the plant, which will be located at the southern-most end of San Jose, CA.

CMS Energy Corp.’s energy marketing unit, CMS Marketing, Services and Trading announced it has been awarded a contract from Illinois State University to manage natural gas supplies for ISU’s campus at Normal, IL. Under a two-year agreement beginning June 1, 2001, CMS will provide ISU with a structured gas commodity management and procurement approach designed to minimize ISU’s natural gas costs and market risks, the company said. ISU uses an estimated 700 MMcf/year. The agreement can be extended up to 10 years by mutual agreement of both parties. Terms of the agreement were not released.

Reliant Energy Wholesale Group, a unit of Reliant Resources Inc., announced a long-term agreement under which Salt River Project (SRP) will buy all of the power to be produced by Reliant’s 560 MW Desert Basin plant. “Desert Basin will help ensure that sufficient power will be available for citizens of Arizona to meet peak demand this summer,” said Reliant CEO Steve Letbetter. “SRP’s management has shown the foresight to seek long-term solutions for the residential and commercial consumers it serves.”

A new independent study on electric reliability in Georgia finds that the state has enough utility-owned power and firm contract purchases for electricity to meet its needs, including a 15% reserve margin, through 2004. In the University of Georgia study, authors Albert Danielsen and Chip Wright studied all relevant public documents to determine if there was enough electricity being made or purchased in the state to keep the power on. The study also finds that if independent power producer plants are considered, Georgia’s adequate power supply will last through 2009. One advantage noted in the study is that utilities have the ability in Georgia to site, permit and build a new natural gas power plant in less than two years.

Denver-based MarkWest Hydrocarbon Inc. announced preliminary results for three new gas wells in which it holds interests. In eastern Michigan, the Sims 2-7 well was successfully recompleted, testing at 4.4 MMcf/d of sour gas and 400 bbl/d of condensate and natural gas liquids. The well is the second to be connected to the Au Gres gas plant, modified by MarkWest and its partners in 2000. The well is scheduled to be on production by mid-July. In western Michigan, MarkWest and its partners have made two gas discoveries. The previously drilled Victory 32, in which MarkWest owns 8.5%, successfully tested before being shut in for pipeline connection. The reef play is only a few miles from the company’s sour gas pipeline. The third well, the Victory 21, in which MarkWest holds a 14.6% interest, found a reef and is shut in awaiting equipment to complete and test the well.

Northern Indiana Public Service Company (NIPSCO) filed testimony with the Indiana Utility Regulatory Commission (IURC) in response to the IURC’s investigation into the company’s current base electric rates. “We believe the IURC investigation is unnecessary and we intend to aggressively defend our current base electric rates,” said Jeffrey Yundt, group president for energy distribution at NIPSCO. Yundt noted that the company’s base electric rates have not changed since 1987. “During this period, NIPSCO has controlled and absorbed costs to avoid an increase for our customers.” The NIPSCO executive said that the company believes the best outcome for all parties could come through a negotiated settlement. “However, NIPSCO’s evidence will show that its electric rates should be increased by approximately 24% to reflect a fair return on the fair value of the company’s electric generation and delivery systems.”

U.S.-based IntercontinentalExchange’s (ICE) takeover of Europe’s International Petroleum Exchange is basically a done deal, with approval of 89.6% of the shares. As of June 15, ICE’s financial adviser, Goldman Sachs, had received 10.25 million shares of acceptance, and with 90% or more of IPE shares in hand, ICE may exercise its right to acquire the rest of the outstanding shares. The deal was announced in late April (see NGI, May 7), but merger talks had been ongoing for several months. Combined, the two exchanges have 4,000 individual users. With the merger, ICE would add London-based IPE’s energy futures contracts and Brent Crude to its over-the-counter energy derivatives. IPE shareholders would receive up to 10% of ICE with the merger. ICE will pay IPE shareholders B class shares worth $5.895 that are redeemable one year after IPE contracts trade exclusively electronically for 10 days, which would value the IPE at $67.5 million. Shareholders also will receive an equal number of A class shares in ICE equity. ICE was founded in 2000 by a group of energy and investment companies, including BP, Royal Dutch/Shell Group, TotalFinaElf, Deutsche Bank, Goldman Sachs, Morgan Stanley Dean Witter and Societe Generale (see NGI, July 31, 2000). BP, Total, Goldman Sachs and Morgan Stanley also are on IPE’s 14-member board of directors. Since the original formation, additional partners include Aquila Energy, American Electric Power, Duke Energy, El Paso Corp., Reliant Energy and Mirant. Based in Atlanta, ICE has offices in Houston, New York City, Chicago and London.

©Copyright 2001 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.