PG&E Energy Trading signed one-year gas management contracts with Roanoke Gas Co. and its affiliate Bluefield Gas Co. last week that the LDCs say could save them $750,000 in capacity release costs alone. Financial terms of the contracts were not disclosed. The deals are expected to begin Nov. 1.

Combined, West Virginia-based Bluefield and Virginia-based Roanoke serve over 55,000 gas customers and have more than 2.7 Bcf of storage capacity. The contracts cover a total of about 8.7 Bcf of gas supply and related transportation and storage capacity. In 1998, Roanoke and its affiliate spent more than $33 million on gas purchases. Roanoke holds pipeline transportation and storage capacity on Columbia Gas and Columbia Gulf and Tennessee Gas Pipeline, and operates its own liquefied natural gas storage facility.

Art Pendleton, COO of Roanoke and Bluefield Gas, said, “We strongly believe that this partnership with PG&E Energy Trading will result in lower gas costs that will directly benefit our customers and ensure that natural gas remains the energy resource of choice in the markets we serve.

“It all comes down to capacity release,” Pendleton continued. “We didn’t feel, as a small gas company that we were doing a good job. By signing on with a major marketer, we think we can save our customers somewhere around $750,000 in capacity release costs.” He stressed the savings total was an estimate.

The announcement is good news for PG&E Corp., which just last week reported disappointing earnings. For the 3Q99, the San Francisco-based company reported a net income of $183 million, versus $210 million in the same period of 1998. One of the main scapegoats was its gas trading sector (see NGI, Oct. 18). Its Energy Services sector, however, improved in the third quarter, registering a loss of three cents/share as compared to a loss of four cents/share in 3Q98.

The deal is also the first major gas management contract announced since Thomas Boren, a former top executive at Southern Co., was hired to head PG&E National Energy Group (see NGI, Aug. 2), the holding company for PG&E’s Gas Transmission, Power Trading and Energy Services divisions.

Boren’s division is a major factor in PG&E’s overall business strategy, the parent company said. Robert Glynn, CEO of the company called it the “primary engine for our future earnings growth.”

John Norris

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