NGI The Weekly Gas Market Report
Mountain Energy Corp., a Midwest gas marketer, said yesterday ithas had to ask about 10% of its customers to change theirfixed-priced supply contracts to index-based arrangements for theremainder of their contracts due to a “major dispute” with AnadarkoEnergy Services over the “hedging of our accounts.”
“At the end of that term, I will settle with them [customers]financially the difference between index and whatever the fixedprice they might have had in their contract…..Many of thecustomers are probably going to owe me,” said Rod Donovan, co-ownerof Mountain Energy. The company, he added, also has offered to letthe affected customers keep their September payments toward anysettlement.
Donovan estimated that 62 of the company’s 700 industrial andcommercial supply accounts, which are primarily located in Missouriand Kansas, will be affected by the change in the supply contractterms. Anadarko supplies Mountain Energy with about 1 Bcf/month ofnatural gas, he noted, adding that the 62 customers account forabout 250 MMcf/month of that. Efforts to reach Anadarko yesterdaywere unsuccessful.
As a result of the hedging dispute, the marketer last weekalerted the 62 customers that effective Oct. 1 the contract pricewould change from the fixed price or cap price to “WNG index plus$0.02 per MMBtu.”
Mountain Energy has given the affected customers the option toswitch to other suppliers. In a Sept. 29 letter, the companysuggested that utilities “may be a reasonable viable option formany customers, given the current market price of natural gas andconsidering the fact that the utility has been injecting lowerpriced gas for winter re-delivery.” Donovan said about 10%, or 6-8accounts, have elected to change suppliers.
“Given the higher prices going into the winter, the summerinjection period allowed the opportunity for these utilities toinject $2.75, $3, and $3.25 gas. For the first time in a long timeif ever, the cost of natural gas sales service [from utilities]will be very competitive” with the gas service of marketers,Donovan noted.
It “will require some time to bring closure” to the hedgingdispute, the company said. In the meantime, Donovan said MountainEnergy is in the process of trying to change gas suppliers thismonth.
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