Spurred by deregulation and the changing role of localdistribution companies, KeySpan Energy, parent of Brooklyn UnionGas, and Enron Capital & Trade Resources (ECT) made an allianceto market gas supply management services to LDCs throughout theNortheast.
The improved profitability from integrating an LDC’s gastransportation, supply, and storage assets into ECT’s national gastrading and risk management operations illustrates the opportunitythat the KeySpan-ECT alliance offers more than 40 utilities in theNortheast.
“ECT will contribute the expertise on what I might callmaximizing the value of pipeline capacity, storage assets,” saidWilliam Kinneary, vice president of KeySpan Energy Supply, the newKeySpan subsidiary participating in the ECT alliance. “They’re anational trader. They know how to get the most value out of gasassets. From a KeySpan perspective, we have familiarity with theregulatory process, utility tariffs and gas pricing for LDCcustomers. And being able to handle the whole range of gas supplyportfolio management right down to the involvement in theregulatory process and the impact on customer pricing has greatvalue.”
Robert B. Catell, Keyspan CEO, said helping Northeast utilitiesto reduce their gas costs can improve the position of natural gasin the market relative to oil. “Our alliance with Enron inauguratesa new phase of energy deregulation in the Northeast, a regionoverly dependent on imported oil.”
The alliance partners are now contacting about 40 LDCs in NewEngland as well as the mid-Atlantic states. Kinneary said thealliance can offer LDCs greater security in an era when they can’tbe sure how many customers they will have or who those customerswill be.
In February ECT agreed to manage the gas supply, storage, andpipeline capacity of Brooklyn Union Gas for one year with anobligation to produce more than $10 million in savings and profitsfor the New York utility’s shareholders and ratepayers withanything above that amount going to ECT. The deal was one of thelargest transactions of its kind to date. “ECT’s guaranteed profitsand savings for Brooklyn Union will serve as a model for otherutilities throughout the country,” said Enron CEO Kenneth L. Lay atthe time. “We believe that this transaction will add significantmomentum to the trend of gas distribution companies outsourcingtheir gas supply function in preparation for full retailcompetition.”
In September last year, KeySpan Energy became the parent holdingcompany of The Brooklyn Union Gas Co., the nation’s sixth largestgas-distribution company.
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