El Paso Natural Gas announced yesterday that it awarded only asmall portion of the 1.4 Bcf/d of soon-to-be available capacity onits system to one shipper – Williams Energy Marketing and Trading.The pipeline rejected the majority of shipper bids because theyfailed to either meet or exceed the “minimum revenue threshold”requirements for the capacity.

As a result, El Paso has initiated a second open season throughOct. 13 for the remaining available 1,254,089 MMBtu/d Blocks I, IIand III of capacity on its system. And as an added bonus, none ofthe available capacity – including the large amount that’scommitted to Dynegy until the end of the year – will be subject toright-of-first refusal in the second round.

During the first round, “that right-of-first-refusal I expectprobably discouraged some potential bidders because they knew thatDynegy could come back in and by matching their bid could take thecapacity away from them,” said El Paso President Richard Baish. ButROFR won’t be a threat in the second open season, he noted.

“People were very cautious in their bidding in the first round,and I think they now have a better sense of where those [minimumrevenue] thresholds will be. As a consequence, I expect we’ll havea lot more interest” in the second round, he said.

In the first open season, Williams Energy was the only shipperwhose bid met the minimum revenue threshold, meaning that it wouldbe able to generate enough revenue annually to either meet orexceed an “undisclosed” threshold. Williams bid 21 cents at 95%load factor for 101,585 MMBtu/d of Block II firm capacity, withprimary delivery point rights to PG&E Topock, SouthernCalifornia Gas Topock and Mojave Topock. The capacity currently isheld by Burlington Resources until the end of the year.

Available for bidding in the second round will be about 1.2BBtu/d of capacity currently held by Dynegy, 40,000 MMBtu/d ofBlock I capacity for deliveries to Topock, and 5,000 MMBtu/d ofBlock III capacity. El Paso said it plans to award the capacity byOct. 18th, finalize the contracts between Oct. 19-22, with thecapacity becoming available on Jan. 1, 2000.

©Copyright 1999 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.