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Tennessee Files Tiny Eastern Express Project

Tennessee Files Tiny Eastern Express Project

Tennessee Gas Pipeline filed a significantly scaled-down version of its Eastern Express Project 2000 last week, reporting that eastern markets have been slow to develop and many New England power generators believe it would be premature to sign long-term contracts for firm gas transportation. The pipeline's application with FERC calls for the addition of only 168 MMcf/d of capacity along the northernmost part of its system at a connection with the Joint Facilities of the PNGTS and Maritimes &amp Northeast pipelines.

That's a far cry from the 4 Bcf/d in which customers supposedly showed interest last winter. After several open seasons in 1997 and 1998, Tennessee said there were requests for capacity from the Gulf of Mexico north to New England, from Chicago and Niagara east to the Mid-Atlantic, and from its connection with Maritimes and PNGTS in Massachusetts to new power generation demand in the Northeast. But the last option appears to be the only one to survive.

"[It's] still a decent sized project, nothing huge by any means," said Mike Stokdyk, business development manager for Tennessee Gas. "We're not disappointed in the results. It would be nice if it were larger, but between some of the power plants moving a little slower than what they had anticipated and what they were telling us and just general uncertainty in the marketplace with LDC unbundling and so forth, it's just not a time when it's easy to get people to make firm commitments," he said.

Eastern Express was whittled down to what most would consider a relatively minor capacity addition for a number of reasons, not least of which is the anticipation that many of Tennessee's long-term contracts will expire in 2000. "That will be an opportunity for people to shift around their requirements," said Stokdyk, but he didn't think it was "the driving issue" behind market decisions. Much more important was the fact that the basis between markets and most supply regions simply didn't justify an expansion.

"If you look at it on a pure basis spread from Chicago to New York for example, you have a basis spread that's about 30 cents and a lot of these projects [including Eastern Express] are proposing at least 70 cents to get it there. If you're not an end consumer, then none of these projects looks that attractive because you don't have that arbitrage opportunity," he conceded. It's tough to compete these days with the release values and IT values on the existing pipelines. The new markets are picking up some firm but also are choosing to play the capacity release and the IT markets, he added.

Eastern Express Project 2000 is scheduled to provide firm transportation service commencing November 2000 from Tennessee's interconnect at Haverhill, MA, and the planned interconnect at Dracut, MA, with the Joint Facilities of Portland Natural Gas Transmission System and Maritimes &amp Northeast Pipeline to delivery points in New England. Tennessee is expanding its system by using existing pipe and right-of-way and installing 13,320 hp of compression at two existing compressor stations. Total capital is estimated to be $28 million.

Two shippers have executed binding firm transportation agreements for 173,000 Dth/d of capacity. American National Power has signed up for 34,000 Dth/d for its 550 MW gas-fired Blackstone Power plant in Massachusetts, which currently is under construction, and El Paso Gas Services, a pipeline affiliate, has signed up for the remaining 139,000 Dth/d of firm capacity primarily to serve four power plants. The four plants are being built by another affiliate, El Paso Power Services, and Project Development Corp. (PDC). They include the 270 MW Berkshire plant in Agawam, MA, which is under construction; the 544 MW Milford, CT, power plant, which has been permitted; the 270 MW Meriden, CT, plant, which is planned; and the 544 MW Summit Power plant in Westfield, MA, which currently is proposed.

"We've got a little over 70% of our position committed to feed those power plants," said Joe Wyzik, manager of business development for El Paso Gas Services, which is serving as a temporary holder of the capacity. "What we saw was a need to bridge some differences between getting the infrastructure in place for the pipeline and the timing of these power development projects. Until they're ready to go to actual construction, [these power plant developers] are not willing to commit to firm capacity on a pipeline.

"Our little operation provides a niche service that fits between a pipeline and a marketing company. We don't buy and sell the gas commodity. We're more of a nonjurisdictional business development company. It is very unique in the industry," he said.

There's about 30,000 MW of proposed power generation in New England and NEPOOL is only a 25,000 MW power pool with existing transmission constraints. Obviously not all of the power plants will be built, Wyzik noted. "In New England there is a significant amount of uncertainty in the marketplace, not about whether the market will grow, but how the regulatory arena will shake out and ultimately operate, on both the electric side and with local gas distribution.

"Our view is that there will be 4,000-6,000 MW of gas-fired generation added to the grid in the six New England states into NEPOOL." Of that total, 1,500 is being committed to Eastern Express Project 2000.

The pipeline is expecting to file additional expansion projects to serve other proposed power generation in New England and New York over the next couple years said TGP President John Somerhalder. Tennessee believes the majority of any additional pipeline capacity will be required in 2002, but the pipeline said it would be glad to work with shippers that have earlier capacity needs. Rocco Canonica

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