Tuscarora Gas Transmission said it most likely will have to cancel the second phase of its proposed pipeline expansion because Duke Energy has put a proposed power plant indefinitely on hold. Phase II of the expansion called for the construction of a 3.7-mile lateral to transport an additional 40,000 Dth/d of gas to Duke Energy North America LLC’s proposed 540 MW Washoe generating plant near Reno, NV.

Last April, the Federal Energy Regulatory Commission approved splitting the Tuscarora expansion up into two phases with the second phase set to enter service in the spring of 2004. FERC gave the first phase a green light last November. The Phase I facilities, which included 10.5 miles of pipeline, provided service to all of Tuscarora’s prospective expansion shippers, with the exception of the Washoe generating plant in Nevada. The first phase provided 55,912 Dth/d of additional firm transportation service to Sierra Pacific Power Co., Southwest Gas Corp. and Morgan Stanley Capital Group Inc. for delivery in California and Nevada.

“We filed early last year to phase the expansion because we suspected this might happen when Duke said they were delaying the power project,” said Tuscarora Director of Marketing and Transportation Greg Galbraith. “Then, Duke notified us that in fact they weren’t proceeding,” he said. “They were about 42% of the expansion.

“We’re looking for replacement shippers right now, but we are probably going to have to file with the FERC in late February or early March” to give formal notification that Phase II is being cancelled, said Galbraith. “It’s a pretty large chunk of capacity, and I have not as yet been able to identify any replacements. There is one entity, but I’m not holding out too much hope for that.”

He added, however, that Duke hasn’t formally cancelled its power project, but “on the other hand, they can’t say when they might proceed with it. If they come back, we can still serve them; we will just have to refile with FERC and recertificate those phased facilities.”

The Washoe plant is one of several that Duke has put on hold and one of many that have been delayed because of low power prices, poor spark spreads and tight margins in the power generation business.

The 229-mile Tuscarora pipeline delivers gas from the Oregon-California border to northern Nevada. It is owned by Tuscarora Gas Pipeline Co., a wholly owned subsidiary of Sierra Pacific Resources.

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