Tennessee Gas Pipeline filed a significantly scaled-down versionof its Eastern Express Project 2000 last week, reporting thateastern markets have been slow to develop and many New Englandpower generators believe it would be premature to sign long-termcontracts for firm gas transportation. The pipeline’s applicationwith FERC calls for the addition of only 168 MMcf/d of capacityalong the northernmost part of its system at a connection with theJoint Facilities of the PNGTS and Maritimes &amp Northeastpipelines.

That’s a far cry from the 4 Bcf/d in which customers supposedlyshowed interest last winter. After several open seasons in 1997 and1998, Tennessee said there were requests for capacity from the Gulfof Mexico north to New England, from Chicago and Niagara east tothe Mid-Atlantic, and from its connection with Maritimes and PNGTSin 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 anymeans,” said Mike Stokdyk, business development manager forTennessee Gas. “We’re not disappointed in the results. It would benice if it were larger, but between some of the power plants movinga little slower than what they had anticipated and what they weretelling us and just general uncertainty in the marketplace with LDCunbundling and so forth, it’s just not a time when it’s easy to getpeople to make firm commitments,” he said.

Eastern Express was whittled down to what most would consider arelatively minor capacity addition for a number of reasons, notleast of which is the anticipation that many of Tennessee’slong-term contracts will expire in 2000. “That will be anopportunity for people to shift around their requirements,” saidStokdyk, but he didn’t think it was “the driving issue” behindmarket decisions. Much more important was the fact that the basisbetween markets and most supply regions simply didn’t justify anexpansion.

“If you look at it on a pure basis spread from Chicago to NewYork for example, you have a basis spread that’s about 30 cents anda lot of these projects [including Eastern Express] are proposingat 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’thave that arbitrage opportunity,” he conceded. It’s tough tocompete these days with the release values and IT values on theexisting pipelines. The new markets are picking up some firm butalso are choosing to play the capacity release and the IT markets,he added.

Eastern Express Project 2000 is scheduled to provide firmtransportation service commencing November 2000 from Tennessee’sinterconnect at Haverhill, MA, and the planned interconnect atDracut, MA, with the Joint Facilities of Portland Natural GasTransmission System and Maritimes &amp Northeast Pipeline todelivery points in New England. Tennessee is expanding its systemby using existing pipe and right-of-way and installing 13,320 hp ofcompression at two existing compressor stations. Total capital isestimated to be $28 million.

Two shippers have executed binding firm transportationagreements for 173,000 Dth/d of capacity. American National Powerhas signed up for 34,000 Dth/d for its 550 MW gas-fired BlackstonePower plant in Massachusetts, which currently is underconstruction, and El Paso Gas Services, a pipeline affiliate, hassigned up for the remaining 139,000 Dth/d of firm capacityprimarily to serve four power plants. The four plants are beingbuilt by another affiliate, El Paso Power Services, and ProjectDevelopment Corp. (PDC). They include the 270 MW Berkshire plant inAgawam, 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 inWestfield, MA, which currently is proposed.

“We’ve got a little over 70% of our position committed to feedthose power plants,” said Joe Wyzik, manager of businessdevelopment for El Paso Gas Services, which is serving as atemporary holder of the capacity. “What we saw was a need to bridgesome differences between getting the infrastructure in place forthe pipeline and the timing of these power development projects.Until they’re ready to go to actual construction, [these powerplant developers] are not willing to commit to firm capacity on apipeline.

“Our little operation provides a niche service that fits betweena pipeline and a marketing company. We don’t buy and sell the gascommodity. We’re more of a nonjurisdictional business developmentcompany. It is very unique in the industry,” he said.

There’s about 30,000 MW of proposed power generation in NewEngland and NEPOOL is only a 25,000 MW power pool with existingtransmission constraints. Obviously not all of the power plantswill be built, Wyzik noted. “In New England there is a significantamount of uncertainty in the marketplace, not about whether themarket will grow, but how the regulatory arena will shake out andultimately operate, on both the electric side and with local gasdistribution.

“Our view is that there will be 4,000-6,000 MW of gas-firedgeneration added to the grid in the six New England states intoNEPOOL.” Of that total, 1,500 is being committed to Eastern ExpressProject 2000.

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

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