Approving new gas storage projects

Approving new gas storage projects, US FERC touts flexibility

Washington (Platts)--18Nov2004


Highlighting the application of rate flexibility to promote infrastructure
development, the US Federal Energy Regulatory Commission on Thursday cleared
the way for operation of new gas storage capacity in the Mid-Atlantic and Gulf
Coast regions. In separate orders, FERC approved a modified cost-based rate
treatment for the Saltville Gas Storage project in Virginia and market-based
rates for the proposed Pine Prairie Energy Center in Louisiana. In the first
case, the commission amended its June 2004 certificate order to reflect the
fact that Saltville will be offering a new kind of cost-based storage rate
that features three rather than two reservation components. In addition to
reservation charges for capacity and deliverability, Saltville will offer a
separate reservation charge for injection of gas into storage.

"This takes into account the fact that salt caverns . . . can provide rapid
response injection and withdrawal to provide flexible service for customers,"
a staffer said, noting that 25% of full capacity in such caverns can be
withdrawn in a single day. The massive Pine Prairie project, to be located in
Evangeline Parish, Louisiana, will feature three salt caverns with total
working gas capacity of 24 Bcf, plus 2.4 Bcf/d of withdrawal and 1.2 Bcf/d of
injection capacity. The high-deliverability project was granted market-based
rates for its firm storage and IT hub services. Designed to serve the electric
generation market and, ultimately, liquefied natural gas terminals to be sited
on the Gulf coast, the project was characterized by Commissioner Suedeen Kelly
as the "poster child" for market-based storage rates. Due to its planned
interconnection with six interstate pipelines, Pine Prairie will be unable to
exert market power in the relevant markets, she said.

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