Critical

Establishing a fair return on equity (ROE) formula for interstate pipelines will continue to be a critical natural gas issue for the Federal Energy Regulatory Commission in the months ahead, said new Commissioner Marc Spitzer Tuesday.

Organized opposition to a coastal liquefied natural gas (LNG) terminal in California, along with critical environmental organizations and utilities, Friday raised the spectre of challenging at least part of the sweeping new state natural gas rules approved by the California Public Utilities Commission (see Daily GPI, Sept. 22). At least one group threatened to file a lawsuit in state Superior Court Monday.

With hot weather having moderated in its Northeast market area, Tennessee canceled Friday the Critical Day 1 OFO that it had issued Wednesday. East Tennessee Natural Gas also lifted its related Balancing Alert OFO (see Daily GPI, Aug. 3).

Due to “limited operational flexibility and warmer temperatures across the system,” Tennessee issued a Critical Day 1 OFO Wednesday that will be in effect until further notice. All LMS-PA, LMS-MA and LMS-PL Balancing Parties with meters in Zones L,1, 2, 3, 4, 5 and 6 are required to maintain an actual daily flow rate not exceeding a tolerance of 2% from scheduled quantities or 1,000 Dth/d, whichever is greater. Customers will be assessed $5/Dth plus the applicable regional daily spot price for underdeliveries by receipt point operators and overtakes by delivery point operators that exceed this tolerance. Tennessee said it cannot accept unscheduled imbalances and requires all customers to nominate and schedule all payback.

Houston Exploration (THX) shares jumped 6% Monday to $57.97 after hedge fund JANA Partners LLC, which has been critical of THX management and recently demanded that the company open its books, offered to buy Houston Exploration for $62 per share, or about $1.8 billion. The company advised shareholders to take no action on the offer until its board has had time to review it.

Based on forecasted markets, available facilities and capacity utilization, Columbia Gas designated Tuesday as a “Critical Day” in Market Areas 21 (southeast New York), 33 and 34 (both southeast Virginia). The pipeline projects that all available capacity to those market areas will be required to meet firm service obligations, leaving zero nonfirm capacity available. Shippers with primary firm rights or secondary priority rights to the affected market areas will not be impacted.

CenterPoint declared a Critical Period Thursday, saying its system is fully subscribed and operating at or near full utilization, and thus it “is requiring customers systemwide, particularly those whose swings can cause operational difficulties…to take deliveries as close to ratably as possible throughout the day during the period that this alert is in effect.” CenterPoint said it will not allow shipper’ takes to exceed hourly ratable entitlements (based on nominated and scheduled quantities) by more than 5% in any hour at the Perryville Hub, 20% in any hour for the North Louisiana and East Texas Core and Secondary systems, and 50% per hour for the remainder of the system.

Due to customers banking more than 300,000 dekatherms on its system over the holiday weekend, Kern River posted a critical notice barring banking Monday morning. The practice persisted, however, with the pipeline projecting the banking amount at 200,000 dekatherms for Tuesday’s gas day. Citing the threat to system operations, Kern River looked at actual flows as of 4:15 p.m. MCT Tuesday and assumed a uniform hourly flow for the remainder of the gas day. Based on that analysis, capacity at Kern River meters was reduced to meet the assumed uniform hourly flow in the Intraday 2 nominations cycle. In an update Wednesday, Kern River said linepack remained at a critically high level and that it “will continue to compare scheduled quantities to actual deliveries and will take appropriate action to reduce unauthorized banking.”

Due to continuing declines in linepack from “receipt underperformance” despite its declaration of a Strained Operating Condition Wednesday, El Paso upgraded the OFO to a systemwide Critical Operating Condition (COC) Thursday. “Performance caps are being placed on all receipt locations that are supplying volumes at less than scheduled rates,” the pipeline said. Receipt shortfalls from San Juan Basin are in excess of 350 MMcf/d, while those in the Permian Basin exceed 300 MMcf/d, it added. “Shippers should immediately evaluate performance of their suppliers and insure that they are sourcing their supplies from locations that are capable of performing…Shippers taking gas above their scheduled quantities should immediately acquire additional supply or reduce their rate of take. There is transmission system capacity available at Waha and at interconnects downstream of Keystone if shippers determine that they need additional or different sources of supply to protect their markets.” El Paso continued to encourage payback of due-pipeline imbalances.