Florida Gas Transmission (FGT) pulled ahead in the crowded race to serve the expanding gas-fired power generation market in the Florida peninsula when FERC last week issued a favorable preliminary determination on the non-environmental aspects of its Phase IV mainline expansion project.

The ruling gives FGT, which already dominates the state’s gas market, a decided advantage over the three competing projects – Duke Energy’s Sawgrass Energy Transmission System, Williams-Transco’s Buccaneer Pipeline and Coastal’s Gulfstream project – that are vying for a potential 1.5 Bcf/d growth in gas demand for power generation in the Sunshine State. The competing projects are larger, targeting volumes between 700 MMcf/d and 1 Bcf/d each, but they have yet to file applications at the Commission. (See NGI, March 8, 1999 and July 12, 1999)

The FGT project calls for the construction of 205 miles of pipeline (laterals and looping) and associated compression facilities in Mississippi, Alabama and Florida, which when combined with the capacity turned back to FGT in a reverse auction would expand the pipeline’s firm capacity capability by 327,000 MMBtu/d [CP99-94]. The project comes on the heels of FGT’s Phase III expansion, which added 525,000 MMBtu/d of capacity.

The start-up of the $350 million Phase IV expansion, which has a proposed in-service date of May 1, 2001, is being scheduled to coincide with the operation of Florida Power and Light’s (FP&L) repowered gas-fired generation facility in Ft. Meyers, FL. The planned facility – a 1,500 MW combined-cycle power plant – will have three times the generating capability of the utility’s two existing oil-fired steam generators. FP&L will be the largest shipper on FGT’s latest expansion project.

FP&L has asked FGT to begin phasing in gas supplies during the generation plant’s preparation stage, beginning with up to 40,000 MMBtu/d between Oct. 1 and Dec. 31, 2000; 80,000 MMBtu/d in January 2001; 120,000 MMBtu/d in February 2001; 160,000 MMBtu/d in March of that year; and reaching 200,000 MMBtu/d in time for the May 2001 start-up of the repowered facility. To meet this ambitious delivery schedule, FGT told FERC it would have to place its proposed West Leg Extension – about 114 miles of pipeline that would connect FGT’s existing West Leg to FP&L’s Ft. Meyers plant and Peoples Gas System’s proposed meter station in Lee County, FL – in service prior to the completion of the entire expansion.

Aside from FP&L, other shippers that have signed up for new FGT capacity include: Florida Power Corp., Kissimmee Utility Authority, Florida Municipal Power Agency, Peoples Gas, Georgia-Pacific Corp., National Gypsum, and Enron Capital & Trade Resources. All have executed 20-year service agreements.

To meet the expected surge in gas demand for power generation, the FGT expansion would tie into Destin Pipeline LLC and Transcontinental Gas Pipe Line’s Citronelle interconnect on its Mobile Bay Line. These would give Florida customers access to deep-water gas supplies being developed in the federal offshore area of the Gulf of Mexico.

FERC approved rolling in the $70.3 million cost of service of the Phase IV expansion with the cost of service of the Phase III expansion, for a total of $220.5 million. FGT contends that its proposed expansion will reduce existing firm shippers’ rates by about 1-10 cents per MMBtu depending on the in-service year of the facilities. The majority of FGT’s firm customers agreed to or did not oppose the rolled-in rate proposal, which was among the issues outlined in a settlement.

The settlement, which FERC approved with one exception, also provides for a rate cap and surcharge discount for all customers under FGT’s FTS-2 rate schedule, including those on the Phase IV expansion. The rate cap would be $0.7536/MMBtu/d from the Phase IV in-service date through Dec. 31, 2003; $0.7760/MMBtu/d through 2004; and $0.80/MMBtu/d thereafter, according to the draft order. Starting on Jan. 1, 2005, 30% of the base rate cap would be escalated annually by the percentage change of the gross national product implicit price deflator. But the base rate would never exceed $0.80/MMBtu/d during the primary term of an eligible party’s FTS-2 service agreement, the order noted. The exception would be FP&L, which will receive more favorable terms.

Susan Parker

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