The City of Long Beach (CA) Energy Department Tuesday indicated its has signed an 18-month supply deal with Coral Marketing tied to San Juan Basin prices to provide all of its interstate supplies, or about 5.5 to 6 Bcf annually. It is priced at 2.5 cents/therm under the San Juan price, with a ceiling of 80 cents/therm, according to Chris Garner, the director of Long Beach’s municipal gas, water and electric department.

“We think we have fixed our gas problem,” said Garner, noting the deal runs from Oct. 1, 2001 through March of 2003. Long Beach earlier in the fall also notched a deal with Southern California Edison Co. over past-due payments to the city’s municipal waste-fired cogeneration power plant.

Garner said he didn’t think that the Oct. 2 court settlement between Edison and state regulators to restore the private sector utility to financial health would affect the city’s agreement for payment.

“Things are looking good right now,” Garner said. “Our gas price during the first month of our agreement with Coral was 15.9 cents/therm, which is less than one-tenth of what our peak price was last winter. Our peak price was in excess of $1.60/therm.”

As with private sector gas utilities in the state, Long Beach retail rates have fluctuated with the wholesale market, which skyrocketed at the California-Arizona border late last year and in the first months of this year.

“We think this (Coral) price will beat the Southern California Gas Co. price for the long term over the 18 months because we have the good San Juan Basin prices,” said Garner, noting that the city’s past supply deals were tied to California-Arizona border prices. “And the key is we are not buying San Juan Basin gas, per se; the supplies’ price is just based on that basin. We don’t have to worry about getting a phone call saying the pipeline is full from San Juan, so we only get 10% of our gas.”

“We have what we characterize as virtual interstate pipeline capacity. We have the equivalent of a fixed-fee interstate transmission capacity charge of 2.5 cents/therm, and we were probably close to a dollar for that less than a year ago. You figure the price of gas was $17 or $18 and the price of the commodity in the basin was $6 or $7, so in theory we were paying about a dollar-per-therm to bring it to the border.

“So we have come a long way.”

Long Beach distributes about 12 to 13 Bcf annually, with about half of the supplies coming from local sources. The rest it must buy on the interstate wholesale market.

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