Kern River Cuts Demand Charges to Expansion Shippers by 8-11%

Kern River Gas Transmission is sending its 2003 expansion customers a little something extra in their "Thank You" notes for signing up for nearly 900 MMcf/d of new gas transportation capacity to Nevada and California markets from western Wyoming. The company said it is decreasing demand charges by 11.4% for 15-year expansion shippers and by 8.2% for 10-year expansion shippers. The proposed rate reductions reflect the lower interest rates in the final debt refinancing of the expansion, which went into service on May 1.

If approved by FERC, the rate reductions would be effective May 1, superseding the rates initially approved for the project. In Docket No. CP01-422-004, Kern told FERC the expansion shippers who signed 15-year contracts should have their base rates revised (demand component only) to 44.55 cents/Dth from the original certificate filing of 51.02 cents/Dth. Expansion shippers who signed 10-year contracts should now be paying 58.47 cents/Dth rather than the original rate of 64.24 cents/Dth. The rates do not reflect the commodity charge of 5.73 cents/Dth or applicable surcharges.

"This is great news for shippers," said Kirk Morgan, vice president of marketing and regulatory affairs for the pipeline. "This proposed rate reduction will make gas transported on the Kern River system more competitive in the marketplace."

The debt issued for the $1.2 billion expansion totaled $836 million and at a coupon interest rate of 4.89%. The project doubled the amount of natural gas transported on the Kern River system. It is backed by long-term contracts for more than 99% of the capacity of the installed facilities. The new facilities are expected to directly serve nearly 6,500 MW of new electric generation.

Kern's 1,679-mile interstate natural gas pipeline has a capacity to bring 1.7 Bcf/d of Rocky Mountain region natural gas from southwestern Wyoming to markets in Utah, Nevada and California. Kern River is a subsidiary of MidAmerican Energy Holdings Co.

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