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In Brief

In Brief

Independent power producer Calpine Corp. acquired Dow Chemical's 70 MW gas-fired power plant at Dow's Pittsburg, CA, chemical facility for about $13 million. The deal includes Dow's gas pipeline system. Key to the transaction is Calpine's plan to build a 500 to 700 MW gas-fired power plant adjacent to the chemical plant. The new power plant will require capital of $250 million to $350 million. The existing plant uses 16,000 MMBtu/d, and the new plant will use 80,000 to 90,000 MMBtu/d.

The American Gas Association told FERC it supports a proposal submitted earlier this month by the New York Public Service Commission calling for a proposed rulemaking that would open up an inquiry into the appropriate rate design for interstate pipelines. AGA and NYPSC believe a change is needed from the current mandate that all interstate pipeline rates conform to the straight fixed-variable methodology. In January, AGA released a paper describing the benefits of non-SFV rate design: it would make capacity "more marketable and assignable because it allows parties to pay for capacity as they use it.," it would create an incentive for the pipeline to use existing capacity before expanding and pipelines would be less inclined to overbuild, according to AGA.

The Chicago Board of Trade's (CBOT) board of directors voted to launch two electricity contracts Sept. 11. The contracts are based on physical delivery into the Commonwealth Edison (ComEd) and Tennessee Valley Authority (TVA) systems. ComEd has connections to nine utilities in Illinois, Iowa, Indiana, and Wisconsin. TVA connects to 18 states with 47.8% of the U.S. population. "These ComEd and TVA Hub contracts will closely parallel commercial activity in the wholesale power cash markets," said CBOT Chairman Patrick H. Arbor. "By offering this energy complex to our members and customers, the CBOT is providing the increasingly important element of risk management to the power industry." The Commodity Futures Trading Commission approved the ComEd contract May 8 and the TVA contract June 8.

The U.S. Department of the Interior's Minerals Management Service (MMS) awarded deep-water royalty relief to a third field in the Gulf of Mexico last week. The relief, which allows royalty-free production from deep federal waters in the Gulf, was applied to Amoco's development of the Desoto Canyon Block 133 field offshore Louisiana. Royalties will be suspended on the first 87.5 million boe produced from the field, nicknamed King's Peak. This field contains dry natural gas and the relief provided could be as high as $143 million. The field is in 6,700 feet of water, about 120 miles southeast of New Orleans. The Deep Water Royalty Relief Act, signed by President Clinton in November 1995, allows the MMS to grant royalty suspension volumes on both producing and nonproducing fields in water deeper than 200 meters to promote development, increase production, or encourage marginal production of Gulf leases west of 87 degrees, 30 minutes West longitude.

TransEnergy Management said two more Canadian companies - CXY Energy Marketing, and Direct Energy Marketing, both based in Calgary - signed licensing agreements for its energy management software. "Energy marketers today need integrated, real-time systems that provide one-time data entry for physical and financial transactions," said Gary M. Vasey, TransEnergy vice president of marketing. "With TransEnergy's systems, our customers can integrate their risk management and trading systems, saving time and reducing errors." Ken Krug, vice president of risk management and financial products for CXY, said the companies original database system forced it to do triple entries, creating the potential for errors. Direct Energy Marketing said its existing system was becoming too costly and difficult to maintain.

TECO Energy announced that its Peoples Gas Co. subsidiary has acquired the assets of Florida Gas Services Corp., a southwest Florida-based propane distributor. Florida Gas Services delivered 700,000 gallons of propane to more than 2,300 customers primarily on Marco Island near Naples and in the Fort Myers area in 1997. Peoples is Florida's largest independent propane company delivering more than 30 million gallons annually to over 50,000 customers statewide.

The Gas Research Institute released a concise study of the natural gas market that examines the dynamics driving short-term prices. The study, "Short-Term Gas Prices: How the Market Adjusts to Changing Fundamentals," discusses how short-term gas prices are affected by the interaction of five key factors-weather, fuel competition, infrastructure, market dynamics and financial issues. Compiled by GRI and Energy and Environmental Analysis Inc., Arlington, Va., the study includes 16 tables and graphs. It identifies a number of possible future developments that may affect short-term pricing, including fuel procurement services and pricing to better meet the needs of the fast-paced hourly markets for electricity, financial fund managers and other traders exploiting opportunities for profitable arbitrage across all energy markets, the increasing impact of environmental regulations, the apparent increase in spring and fall storage injections, and the impact of new pipeline capacity. For a copy of the report call Val Megginson at 703-526-7832.

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