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INGAA Pushes Flexibility To Serve the Market

INGAA Pushes Flexibility To Serve the Market

Customers looking for services tailored to their specific needs are driving pipelines to seek lighter-handed regulation including the ability to negotiate and deliver those services on the spot -without lengthy FERC proceedings, according to Interstate Natural Gas Assoc. (INGAA) chairman John Riordan.

Only by gaining the flexibility and the ability to take risk and gain rewards like normal businesses can pipelines expand to deliver to the 30 Tcf market that has been predicted by the year 2005. Riordan, who also is vice chairman of KN Energy, said the INGAA Foundation has initiated a study on the steps industry must take to get to that 30 Tcf market.

INGAA hopes to work through the Natural Gas Council with the other gas industry organizations, including the American Gas Assoc., the Independent Petroleum Assoc. , the Natural Gas Supply Assoc. and the American Petroleum Institute, to make it happen.

The KN executive took a swipe at producers and municipals who have opposed the proposal submitted by the American Gas Assoc. (AGA), with INGAA's backing calling for negotiated terms and conditions of service. "They call themselves customers, but many hold little or no capacity on interstate pipelines or are not participating in state unbundling....Maintaining the status quo may be good for some producers, but it's not the way we're going to get to the 30 Tcf market. Producers call themselves customers, but the ultimate consumer is the customer." Riordan said the pipelines needed market incentives and the ability to make a higher rate of return if they are to provide the needed capacity.

He acknowledged there had been a breakdown in communications, saying "we want to find a way to work with producers....we can't continue do things the way we used to." Both pipelines and producers have reduced costs because of the competitive market, Riordan said. "The more you deregulate, the more costs will go down. We want to convince producers to trust the market." Riordan acknowledged that increasing the pipelines' ability to negotiate the types of new services customers want would tend to reduce stranded capacity costs.

On other issues Riordan also commented that he expected the producer organization API to have a much bigger role as the industry goes forward.

And he said a survey of pipelines has shown they have ongoing plans and already have completed a significant amount of the remedial work necessary to deal with the year 2000 problem in computers. And "transaction systems have built-in back-ups which used to run without all this electronic stuff. We can still do that if we have to....but we don't expect problems." INGAA is cooperating with the Natural Gas Council in conducting a survey of the year 2000 problem in the entire gas industry.

Discussing the potential market, Riordan pointed out that the increase by 2005 would be 36%, but divided into annual increments it would only be between 3% and 4% a year. Most of the new load will come from electric generation put in place by a variety of sponsors. The market impact of global warming is not included in these numbers because it is not clear when Congress will act.

He mentioned a phased 200 to 600 MW independent power venture, which includes Peoples Energy, be put in place over one of People's storage fields. KN also is looking at a joint venture in the Chicago area for a 600 MW plant. Riordan expects to see more new generating plants being located over gas storage fields or market hubs.

Ellen Beswick

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