While major pipeline capacity additions for the Californiamarket will take at least two years, Transwestern Pipelinecurrently is looking at modifications that could contribute about50 MMcf/d “as early as next fall,” according to Enron PipelineGroup President Stan Horton.

Enron’s Transwestern has just completed an open season for amajor capacity addition, which Horton said could be brought on-lineby 2003, “but we’re trying to do something a little bit quicker. Wehave our facilities people looking at piping modifications andcompression modifications that we might be able to make to add someadditional capacity, albeit small amounts of capacity, under sometype of emergency certificate…to be in place by early next fall.”Transwestern just put into service last May a 140 MMcf/d capacityexpansion. “Interestingly enough, that was opposed by some of theutilities in California.”

Responding to questions from the press at a luncheon sponsoredby the Interstate Natural Gas Association of America (INGAA),Horton said a number of factors combined to spark the high energyprices in California, including a shortage of hydropower, low gasstorage because of the high summer usage, plants down for repairsalso because of high summer usage.

But he noted that while power prices stayed high, natural gasprices spiked in the $60 Mcf range, then dropped by 70% within afew days. “That’s because you saw supplies re-allocated —actually the pipes were full, but supplies were re-allocated —within the state from north to south, and you also saw demandrespond almost immediately. In electricity you don’t see that.There’s really no demand response. No matter how high the spotmarket goes, you see the same price at the retail level.” Hortonsaid the power market prices could be moderated if the Cal-ISOcould buy demand reductions. “They do that now some, but they needto do it more.”

Horton, who is chairman of INGAA this year, also acknowledgedthat Enron has cancelled some projects to build small peakingfacilities in California that could be done in a relatively shorttime frame, because the company would not be able to recover thecosts of these units under a price cap regime. Enron and othersstill are working on baseload or intermediate power facilities thatwould come on line in 2003.

On the gas side there has been a demand response to the highcommodity prices on other Enron pipelines. Horton said that FloridaGas was running about 300 MMcf/d down from the same time last yearbecause of fuel switching by utilities in that state. Also onNorthern Natural there has been a demand response to the highprices. While industrials and others are switching off natural gas,Horton said that didn’t mean Enron was losing them as customers.Rather, it gave them the opportunity to sell them new products.”We’ve had a lot of customers say they would like to sit down andtalk to our risk management people about how to manage theirforward risk.”

©Copyright 2000 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.