Florida Gas Transmission (FGT) has advised FERC that marketersEnron North America Corp. and Dynegy Marketing and Trade havedropped out of its Phase V expansion project in the wake of aFlorida Supreme Court decision in April that dealt a serious blowto the development of merchant power in the state.

The withdrawals of Enron and Dynegy could force FGT tosignificantly downsize its latest expansion plans, as the twomarketers combined represented nearly 100,000 MMBtu/d of contractcommitments. Enron had signed up for 50,479 MMBtu/d, while Dynegyhad entered into a precedent agreement for 41,204 MMBtu/d.

The proposed firm capacity that the marketers had signed up forwas tied to the construction of two new power plants — DukeEnergy’s New Smyrna Beach facility and the Palmetto Power plant.But the Florida court threw merchant power construction in thestate a curve ball when it held that state regulators wereprohibited from authorizing the construction of new generationfacilities whose output was not fully committed to use by Floridacustomers who purchase electrical power at retail rates.

Specifically, the court ruled the Florida Public ServiceCommission exceeded its authority by approving the need for the 514MW New Smyrna Beach facility when only 30 MW of the plant’s outputwould be dedicated to in-state use. The decision effectively blocksconstruction of a string of about 25 merchant power facilities thathave been planned for the Florida market.

“Rehearing of this opinion has been sought; however, the matteris not expected to be resolved within the Phase V expansionschedule,” FGT told FERC [CP00-40]. The proposed Phase V project,which would add 231 miles of new pipe and 400 MMcf/d of capacity toFGT’s system, is targeted for completion by April 2002.

Although it had pulled out of the Phase V expansion, FGT saidEnron has informed it that it wants to participate in thepipeline’s next expansion, for which an open season is now beingheld. The Phase V expansion capacity that Enron had initiallycommitted itself to the construction of the New Smyrna Beachfacility.

Dynegy notified FGT by letter that it was exercising itstermination rights for firm expansion capacity that was related tothe Palmetto Power plant. The Houston-based marketer said itcouldn’t commit to the capacity “at this time,” FGT said.

FGT noted it currently is negotiating with replacement shippersfor the capacity returned by Enron and Dynegy. It said it plans tofile an amendment to its Phase V expansion application at FERC onor before Aug. 1.

FGT said it already has decided to exclude a number offacilities from the Phase V expansion: 1) 29.8 miles of 16-inchline located in Volusia Country, FL; 2) 6.8 miles of 16-inchpipeline in Orange and Osceola Counties, FL; 3) 14.8 miles of24-inch pipeline looping in Polk Country, FL; and 4) 8.2 miles of24-inch pipeline looping in Hillsborough Country, FL.

Susan Parker

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