Trigen Energy announced it is mounting a legal battle to forcePECO Energy to honor terms of a Gray’s Ferry power purchaseagreement. Trigen said the Grays Ferry Cogeneration Partnershipreceived a letter from PECO saying the Pennsylvania utility couldnot pay the full contract price for electricity from the 150 MWcogeneration plant. The plant sells electricity to PECO and steamto Trigen-Philadelphia Energy. It is located in Philadelphia andwent into commercial operation earlier this year. Ironically,Exelon, a wholly owned subsidiary of PECO Energy, is a one-thirdowner in the project with Trigen and NRG Generating.
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Tax Relief Bill for Alternative Fuels Introduced
Rep. John E. Ensign (R-NV) proposed legislation late last weekthat would provide a 50-cent income tax credit for each gallonequivalent of natural gas, propane and methanol used in vehiclesplaced in service after Dec. 31, 1997. The tax credit will act as a”significant financial” incentive for fleet managers and others tostep up their use of clean, domestic fuels.
DOJ Clears Enova-Pacific Enterprises Merger
The proposed merger of Pacific Enterprises and Enova Corp. wascleared by the U.S. Department of Justice following a settlementagreement that calls for the merged company to divest itsgeneration assets and seek additional DOJ approval of any purchasesof existing power plants exceeding 500 MW of capacity inCalifornia. It calls for Enova to follow through on its previouslyannounced auction of San Diego Gas & Electric’s (Enova’sprimary electric utility subsidiary) two fossil-fuel power plants,located in Carlsbad and Chula Vista, CA. The agreement ends DOJ’sreview and clears the merger under the notification requirements ofthe Hart-Scott-Rodino Antitrust Improvement Act.
PanCanadian Launches North American Marketer
PanCanadian Petroleum has established energy marketerPanCanadian Energy Services through the consolidation ofHouston-based National Gas & Electric and PanCanadian’s naturalgas marketing group in Calgary, AB. The company also operatesregional sales offices across the U.S. in Austin, TX, SanFrancisco, CA, Mobile, AL, and Atlanta, GA. Midwest customers areserved by PanCanadian affiliate National Energy Management, inChicago and Madison, WI. Pan Canadian Energy Services is based inHouston.
Some Discord on PG&E’s Gas Accord
The first bidweek under Pacific Gas & Electric’s Gas Accordtransportation framework was a rough ride for many doing businessin the drastically changed northern California market. WhilePG&E went ahead with its massive computer system upgrade onschedule, few shippers were prepared to handle it.
Amtrak Outsourcing Utility Service
March 17 is the deadline for bidders to present proposals tosupply and manage the natural gas, electric and water and sewerutility services for the National Railroad Passenger Corp. (Amtrak)at facilities across the country. The current bill for the services- which Amtrak would like to see reduced – is $30 million a year.
West Flatness, East Softness Draws Basis Tight
Basis relationships have tightened by a remarkable degree inMarch, and Thursday’s continuing price strength in the West coupledwith drops of a nickel or so at points in the Gulf Coast,Midcontinent and Appalachia/Northeast brought the regions evencloser.
MC2 Looking to Western Markets
As a result of KN Energy’s acquisition of MidCon Corp. in lateJanuary, MC2 said it plans to turn its focus to retail natural gasand electric markets in western states in which its new parent doesa lot of trading.
Some Observers Seek to Preserve Merchant Role of LDCs
State regulators shouldn’t force utilities to relinquish theirmerchant role in a competitive natural gas market, industry expertsagreed last week. Why bother? Given enough time, the market will dothat job for regulators, an energy supplier remarked.
Chesapeake Buys Oxy Properties
Chesapeake Energy agreed to buy MC Panhandle Corp., a whollyowned subsidiary of Occidental Petroleum for $105 million cash forestimated proved reserves of about 100 Bcf in the West PanhandleField in Carson, Gray, Hutchinson and Moore counties of the TexasPanhandle. The reserves are 100% gas, have an estimatedreserve-to-production index of eight years, and are 85% proveddeveloped producing. During 1997, the wells produced about 13 Bcf(36 MMcf/d) net to Occidental’s interest from 256 wells, of whichall but two were Oxy operated wells. Chesapeake will assumeoperations of the acquired wells and will own an average workinginterest and net revenue interest of 99.5% and 85.2%, respectively.The transaction is effective Jan. 1, with closing scheduled May 29.With this purchase and pro forma for Chesapeake’s pending Hugotonand DLB transactions, Chesapeake’s estimated proved reserves willincrease to about 1,050 Bcfe. The Hugoton Energy Panhandleproperties to be acquired by Chesapeake were originally acquiredfrom Oxy in 1992. Chesapeake CEO Aubrey K. McClendon, said, “asresult, we expect to be able to operate these reunited propertiesvery efficiently out of Hugoton’s existing Pampa, TX, field office.For example, pro forma for these acquisitions, we expect our directproduction costs in the Texas Panhandle, excluding productiontaxes, to average approximately $0.30 per Mcf. These arehigh-margin, low-maintenance wells that we believe will provideaccretive results to our cash flow in 1998 and beyond.”