Transco creating new trading pool in Alabama

The US Federal Energy Regulatory Commission (FERC) has approved changes to Transcontinental Gas pipeline's (Transco) tariff that establish a new trading pool in Alabama and enhance the line's no-notice firm transportation service.

The new pool located at compressor station 95 in Marion Junction, Alabama, will allow Transco to better handle imbalances on its system caused by lower-than-usual demand. The change lets shippers send excess gas downstream to the pool, providing access to more trading opportunities. Transco in its filing with FERC said it devised the new pool in order to address shipper concerns that arose after the pipeline said it may eliminate a transportation path for excess gas.

The tariff changes also give Transco's firm transportation customers the ability to take no-notice service at non-traditional or secondary delivery points when feasible.

No-notice firm transportation service allows customers to deviate from scheduled volumes without being charged a penalty. The service differs from interruptible transportation service, which is not secured through a firm transportation contract and is therefore subject to curtailment or interruption if necessary.

To support its proposal, Transco submitted records to FERC showing its total imbalances during the month of July in zone 5, which comprises of Transco's line from the Georgia-South Carolina border to New York City. The records showed that for two-thirds of the total due-from shipper imbalances, shippers had selected receipt points in a different operating area than the one in which the gas was taken from, resulting in low line pack in zone 5.

Some companies protested Transco's proposed tariff change to create the new pool, but most commenters supported the no-notice service proposal, FERC said.

Those who protested the pool argued that it would significantly lessen shippers' ability to deliver gas quantities in excess of scheduled amounts. Transco Municipal Group (TMG), South Carolina Electric & Gas and Public Service Co of North Carolina argued that in order to shift due-to imbalances to the new pool, a shipper would need to have available capacity it is not using to deliver that gas.

FERC convened a technical conference to listen to arguments for and against the changes, ultimately finding that both changes are just and reasonable. FERC directed Transco to file new tariff records reflecting the changes at least 30 days before their effective date.

Spot natural gas prices at zone 5 averaged $2.93/mmBtu in July, 2pc lower than a year earlier and at a 14¢/mmBtu premium to the Henry Hub. Demand in the southeastern US has grown in recent years amid a growing population and increases in gas-fired power generation. But several pipeline expansions over the past five years have targeted that demand, shipping inexpensively produced gas from the Appalachian shale to zone 5.

Prices at zone 4, which comprises Transco's line in Mississippi, Alabama and Georgia, averaged $2.79/mmBtu in July, 5pc lower than a year earlier and at a 1¢/mmBtu discount to the US benchmark.