Enron Inks Gas Deal Through Nonprofit Group

Enron Capital and Trade Resources currently is negotiating a deal with a Lincoln, NE-based nonprofit joint power agency to sell it wholesale bulk, multi-year gas supplies so the agency can in turn sell them at below-market prices to municipal utilities in California and other states. Brokered through the American Public Energy Agency (APEA), supplies would be paid for in advance at discounted prices using the APEA tax-exempt financing capability.

APEA already has supply contracts with municipals in other states. Its deals with the three California cities, totaling about 11 MMcf/d, are priced at four cents below indexed rates at the California-Arizona or western Canadian border. The California buyers are the City of Long Beach gas department and Pasadena and Glendale municipal electric utilities for power generation. American Public Energy uses its tax-exempt financing power to purchase the supplies from Enron, passing on the savings to municipals which, by law, are its only customers. This is the first time the California cities have bought energy supplies from APEA, and they credit Enron with putting the pending deal together.

Enron C&ampT and APEA are expected to wrap up a deal by late April, with the first supplies flowing this summer to Glendale, and in the fall to Long Beach and Pasadena. Neither organization would talk about the volumes or timeframe being sought in the discussions, but it is assumed the talks are aimed at long-term supplies that exceed the requirements of the three California municipal utility deals.

"Until it is pulled together in final form, it isn't a closed deal," said John Musselman, a private attorney representing APEA who noted that the California munis, on the other hand, have signed "substantially final" gas supply contracts. "It is just a matter of time until that (the Enron deal) is accomplished." Long Beach expects to save about $174,000 on about 4.3 Bcf of gas taken in heating season months of October through May, ending in the spring of 2002. It represents about one-third of the municipal gas/water utility's load, with the rest of the supplies split evenly between monthly spot market purchases and local production, according to Elizabeth Wright, a gas department executive. Daily supplies under the Enron deal will range between 2.5 MMcf/d and 10 MMcf/d, she said.

Richard Nemec, Los Angeles

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