The substantial energy management outsourcing relationshipbetween New England gas distributor Yankee Gas and energy marketerTransCanada Gas Services continues to grow. After a competitivebidding process, Yankee signed a new one-year contract that allowsTransCanada to manage another large part of Yankee’s gas supply,storage and long-haul pipeline capacity.

It is the second supply management arrangement the two companieshave signed. In 1998, they agreed to a similar deal, which is still inplace (see Daily GPI, Oct. 20, 1998). Intotal, TransCanada now controls 88% of Yankee’s gas supply portfolio.

“By having TransCanada manage all of our supply, capacity,storage and citygate needs, we can optimize our assets whilerealizing substantial cost savings — and that’s good for ourcustomers and our shareholders,” said Dennis E. Welch, COO ofYankee Energy System, parent of Yankee Gas. “TransCanada has aproven track record with Yankee and that it important [in] assuringour customers a reliable and cost effective gas supply in today’srapidly changing commodities market.”

This new contract calls for TransCanada to manage about 3.2 Bcfof Yankee’s gas storage on the Texas Eastern (Tetco) and DominionTransmission pipeline systems. It also calls for TransCanada toprovide Yankee’s supply requirements on Tetco and manage Yankee’s109,000 MMBtu/d of transportation capacity on Tetco, Dominion andAlgonquin pipeline systems. Under their existing agreement,TransCanada already manages 55,000 MMBtu/d of Yankee’s gas supplyand firm transportation capacity on Tennessee Gas Pipeline, as wellas 2.8 Bcf of its storage capacity on Tennessee and 40,000 MMBtu/dof firm capacity on Iroquois Gas Transmission.

“We’ve done a lot with TransCanada and they have served us verywell from a reliability perspective,” said Marc Andrukiewicz,Yankee’s director of gas management. “These agreements that we dowith them tend to insulate us from both supply and price risk ofthe marketplace. And the mechanisms of the contracts allow us toshare the benefits of them with our ratepayers.” There’s amechanism that provides a reimbursement to Yankee and its customersfor the value of the capacity that is not utilized by Yankee duringoff-peak hours, he said.

“I would classify the arrangement as extremely successful forsupply and price risk mitigation,” Andrukiewicz added. “Theobligations of TransCanada are to provide the gas when we call forit. We have tremendous flexibility as an LDC with that. We’re ableto estimate our usage on a daily basis and simply call on thatsupply for the day.”

TransCanada now manages all of Yankee’s Gulf Coast supply on theTetco and Tennessee Gas systems and provides a substantial amountof Canadian gas to Yankee at the Niagara import point on bothTennessee and Iroquois.

Yankee, a subsidiary of Northeast Utilities, is the largest gasdistributor in Connecticut, serving more than 185,000 customers.

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