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Lower Rates Offered for Spectrum's Second Open Season

Lower Rates Offered for Spectrum's Second Open Season

Hoping the second time is the charm, Duke subsidiary Texas Eastern Transmission announced Wednesday an open season for 300,000 Dth/d of firm capacity on its proposed Spectrum Pipeline project. The open season will last from May 7 to June 4.

In 1997, Tetco offered capacity for the project, which would transport gas from Chicago to the Northeast, but nobody signed on the dotted line. "We got nominations, but when it came time to commit, nobody did. The timing wasn't right for that first open season," said Tom O'Connor, vice president of Tetco's East Coast marketing. "People weren't exactly sure about the gas being in Chicago back then, so they were hesitant. Now, with the Alliance project moving forward, gas in Chicago is much more certain."

This time around Tetco has lowered the transportation charge from 70 to 54 cents/Dth. Randy Riha, a Tetco spokesman, said this will be the lowest cost option for transporting gas in from the Midcontinent to the Northeast. Other proposed pipelines that are designed to carry gas in the same direction as Spectrum are charging 70-80 cents/Dth.

Tetco said it was able to achieve such a low transportation rate because it is not planning to install new pipe. Spectrum will reallocate capacity. This strategy also helps avoid environmental hang-ups, Tetco said. Additionally, the low Spectrum rate was achieved because of the implementation of Tetco's rate initiative that FERC approved last September (See NGI, Sept. 7).

O'Connor said because the program involves no pipeline construction, it can offer a more flexible service to shippers. "Because we don't have any of the burdens associated with building new pipe, we have the luxury of offering capacity with some flexibility," said O'Connor. "The 300,000 Dth/d is real capacity that is already available on the system. It is turnback capacity, which in our minds, is the most efficient use of capacity available."

Yet the question of transport cost justification still looms over Spectrum and all the other Chicago to Northeast pipeline projects. Using NGI's bidweek prices for 1998, the average Chicago Citygate price was $2.19/MMBtu versus $2.43/MMBtu at the New York Citygate, for a differential of 24 cents. With this low differential, buying from the spot market in New York would still be preferable to transporting gas from Chicago.

Bobby Evans, president of Tetco, said the Alliance Pipeline will help make the Spectrum program a viable and cost effective option. "We believe that customers seeking firm capacity with a 2000 in-service date to coincide with the in-service date of Alliance Pipeline will be particularly interested in Spectrum."

Up to 200,000 Dth/d of the capacity would be available in the fall of 1999 to provide transportation access from mid-continent and Canadian natural gas sources via existing interconnects and from Gulf Coast, offshore Gulf Coast and Appalachian natural gas supply sources, Tetco said. Midwestern, ANR and Tennessee are offering upstream services for this part of the program.

For open season details, call Randy Riha at (713) 627-4746 or visit http://infopost.link.duke-energy.com/spectrum/

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