GAS PIPELINES. Noting a move toward shorter-term contracts since Order 636, the FERC on July 29 issued an "integrated package" of reform proposals for the natural gas pipeline...
open-access filings, the competition genie is out of the bottle. All it will take is a few states with considerably cheaper electricity (em fired by gas (em to motivate the other state commissions to not only allow, but encourage, competition in order to retain industry, jobs, and the tax base that go with them. Exactly what FERC does with its NOPR, or Congress does with PURPA, may influence the pace but not the final outcome, which we perceive as good for the natural gas industry in the long run.
We do not so much perceive a bias for coal as a familiarity between utilities and coal that comes with many years of use. The gas industry has taken steps to offer the kinds of services electric utilities need, at prices that will beat coal by a penny or two per kilowatt. Even if there is a bias toward coal, it would cost utilities too dearly in a competitive generation market for the bias to be sustained.
Should gas pipelines become power generators? Many already have. However, as with any other nonjurisdictional activity, pipelines will spin such activities off to an affiliate rather than do it themselves. That system appears to have worked well in gathering and gas marketing. Pipelines are getting into the business of selling and pipelines move gas (em whether the Btus take the form of burnertip methane or electricity in wires.
William J. Grealis
Gas Business Unit, Cinergy Corp.
Gas-fired generation is perhaps the most apparent opportunity for the gas industry in the deregulation of the electric industry. We have probably seen the last of the large central station generating units. The growth in supply in the future will come from smaller generating units that have lower capital costs and are designed to meet specific needs. In many instances, they will be cogeneration facilities located with electric end users. Gas can be the fuel source for a significant portion of this new generation, much of which will be built by nontraditional companies.
However, excess capacity, lower prices, and more efficient use of existing plants through regional market-based economic dispatch all mean fewer opportunities to build new generation over the next decade. There is no bias in the marketplace in favor of any fuel (em all fuels will compete strictly on cost per kilowatt produced. But even the most efficient new gas-fired combustion turbine has higher marginal costs than the baseload coal plants that will dictate the market price for the overwhelming majority of hours.
Michael G. Morris
President & CEO
Consumers Power Co.
Being a combination utility, we have a unique view about the demand for additional electrical generation. It is clear that the demand profile continues to increase throughout the United States and in the East Central Area Reliability states. Compounding this undeniable fact is the reality that most electric utilities remain somewhat concerned over long-term asset answers to this coming shortfall when nothing but uncertainty rules their future.
Natural gas is the fuel to fill this need, given the shorter cycle time required to build natural