While scores of pipelines are jockeying to supply gas to newpower generators in the Northeast market, PG&E Gas Transmission— the seventh largest pipeline in the nation – is turning itsattention to the rapidly growing generation markets in the PacificNorthwest and Texas, where the competition from rival pipelines ismuch less fierce.

“We’ve got a pretty good shot at picking up a big piece” of thenew generation capacity that’s projected for these markets, saidTom King, president and COO of PG&E Gas Transmission, abusiness unit of PG&E Corp. that includes the PG&E GasTransmission-Northwest system in the California/Pacific Northwestregion, as well as a network of intrastate facilities in Texas.With the exception of Williams, “the competitors are limited” forthe growing Pacific Northwest generation market.

“We are ‘the’ pipe, except for [BC Hydro’s and Williams’] veryrecently announced Vancouver project, that’s tied to the AlbertaBasin. We can very effectively and efficiently expand the system at[an] appropriate cost and still meet the market need relative topricing and basis differential,” he told reporters last Tuesdayduring a press briefing at the company’s office in Washington, D.C.But rather than going up against each other head-to-head, King sees”more of a need [for] cooperation between the two systems” inbuilding expansions to meet new generation load.

Conservatively, he projects that PG&E Gas Transmission willneed to incrementally expand its existing 6 Bcf/d system by as muchas 200 MMcf/d over the next few years to serve California and thePacific Northwest market. That may be small potatoes compared tosome of the mega-projects being announced, but King noted theinitial expansion estimate is based only on the power generationprojects that PG&E Gas Transmission is certain will berealized.

The Pacific Northwest expansion would meet the needs of sixproposed generation projects (2,600 MWs) that presently are beingconstructed or have been permitted, and that would be “directlyconnected” to PG&E GT-NW’s system, King said. It doesn’tinclude nine other projects (with 3,900 MWs of new capacity) thatalso have been slated for the region.

Capacity-wise, he said PG&E Gas Transmission is in goodshape to serve the expanding generation markets in Texas. He notedfour new generation projects are scheduled to go into serviceeither later this year or in 2000. The projects, when completed,would add an aggregate of 3,100 MWs of new generation capacity inthe state. King estimated that another 12 projects are on thedrawing-board in Texas, and said he plans to aggressively pursuethose. In fact, King noted that PG&E Gas Transmission’s effortshave begun already.

In the Lone Star state, “we…launched e-commerce about a monthor two ago” for intrastate pipelines. “This is a big deal for theintrastates” because it moves them into the interstate pipelineworld, he said. “We’re the first ones to really step out and do itfor intrastates,” adding that next year “we’re going to target nomsand scheduling electronically through our Web site.”

It is “also looking at [offering] new services within theintrastate system,” such as parking and lending, and services toaddress generation load swings, King noted. Moreover, it’s lookingto expand its storage capacity in Texas by 3 Bcf over the nextthree years.

Before moving ahead with the system expansion, however, Kingsaid PG&E Gas Transmission will hold – probably within the nextmonth – a reverse open season, enabling customers to turn backunused capacity to the pipeline. He said he believes this will becompleted within 60-90 days, with the incremental expansiontargeted for operation by 2001-2002.

“The drive behind our open season is to rationalize ourcapacity-holders. And that is going to give us a very clearindication of how much…..expansion we need. We got about 40MMcf/d uncontracted. And there [is] 50-100 MMcf/d [of] immediatemarket coming on board here,” King said. He doesn’t think FERC’spreference for incremental rate treatment for new expansions willbe a problem. “We have the ability to expand…..withoutjeopardizing our ability to cover the cost…..And we are willingto take a more risk-oriented profile than we have in the past.”

While opposition from landowners is the biggest problem facingthe pipeline projects proposed for the Northeast market, King said”probably the biggest battle that we’ll have on our hands” isdealing with the fallout from an explosion of a products pipelinein Bellingham, WA, last June, which killed three.

“That has heightened the [concerns of] residents, governmentalofficials and regulatory officials on the issue of pipeline safety.That accident will cause us to have a little more of abattle….than we’ve had historically,” he noted. King believes thefallout eventually will be felt by gas pipelines nationwide. “Theentire industry, not just in this region,…..is going to have amuch more difficult time [with expansions] due to that explosion.”

As for entering new markets, King said affiliate PG&EGenerating is eyeing “some opportunities” in the Midwest,specifically in Ohio and in Wisconsin. It’s looking at prospectsthat would be “accretive to earnings immediately.” He wouldn’t saywhether PG&E Gas Transmission plans any new pipeline projectsto serve generation load in that region.

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