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
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