Ruling that Progress Energy Florida (PEF) was simply enhancing the reliability of its fuel supply, the Florida Public Service Commission (PSC) on Wednesday granted the utility permission to recover the costs associated with transporting new supplies of domestic natural gas. The utility said it plans to enter into a series of agreements to move gas on a proposed pipeline known as the Southeast Supply Header (SESH).

When complete, the 270-mile pipeline will transport gas from Perryville, LA, to interconnects with Gulfstream and Florida Gas Transmission near Mobile County, AL. SESH, which is owned by Spectra Energy and CenterPoint, is expected to be in service in the summer of 2008.

"Access to the Southeast Supply Header pipeline and new domestic natural gas supply basins will help ensure that Florida can keep up with the growing demand for natural gas," said PSC Chairman Lisa Polak Edgar. "By increasing the number of potential suppliers, utilities can also lessen the impact of possible supply disruptions caused by hurricanes or other severe weather events."

The proposed pipeline gives PEF access to new onshore gas production basins in North Louisiana and East Texas. PEF currently relies heavily on gas produced offshore in the Gulf of Mexico, which is susceptible to interruption from hurricanes and tropical storms. Commissioners agreed that supplier diversity and reliability would be enhanced by reducing PEF's dependence on fuel supply sources in the Gulf of Mexico.

Commissioners said they carefully weighed PEF's request along with the benefits to its customers and voted to allow the company to recover the costs of transporting gas through the pipeline. Commissioners also agreed that SESH will increase supplies in the Mobile Bay area and, as a result, might lower costs. If realized, the lower costs would offset any additional gas transportation costs. The PSC will review the gas transportation costs and fuel savings in PEF's annual fuel clause proceedings.

As of late January, customer commitments for capacity on SESH had already reached nearly 1 Bcf/d, which will be the initial capacity of the pipeline. PEF, Florida Power & Light, Southern Co., Tampa Electric Co. and EOG Resources have committed to a total of 945 MMcf/d of capacity on the system (see Daily GPI, Jan. 19).

©Copyright 2007 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.