Florida Gas Transmission (FGT) advised FERC last week thatmarketers Enron North America Corp. and Dynegy Marketing and Tradehave dropped 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.

Both Enron and Dynegy had contracted for proposed firm capacityon FGT that was tied to the construction of two new power plants -Duke Energy’s New Smyrna Beach facility and the Palmetto Powerplant. But the Florida court threw merchant power construction inthe state 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 NewSmyrna Beach facility when only 30 MW of the plant’s output wouldbe 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 Vexpansion, which would add 231 miles of new pipe and 400 MMcf/d ofcapacity to FGT’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 initiallycontracted for was tied 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.

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