Natural gas supply grows, lower prices possible

Competition between natural gas companies may mean cheaper rates for customers soon — a byproduct of natural gas deregulation rules.

And with deregulation has come more natural gas supplies as new

pipelines are constructed in the near term to meet growing demand in the Denver-Boulder market..

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In December, Public Service Co. announced plans to construct a $25 million pipeline that

would stretch for 53 miles between its Fort Saint Vrain power plant and a group of intersecting

pipelines located south of Cheyenne, Wyo.

Earlier last year, Public Service aligned with Colorado Interstate Gas to

increase the flow of natural gas to the Front Range by up to 150 million cubic feet daily.

Separately, KN Energy has proposed building a $31 million pipeline to bring up to 250 million

cubic feet of natural gas to the area.

All the proposals are currently in the approval process before regulatory agencies. Industry experts say much of this new activity is a result of deregulation of the natural gas business and new competition.

Although local distribution of natural gas still is regulated, the wholesale piece of natural

gas production was deregulated several years ago.

The Denver-Boulder area uses about 500 cubic feet of natural gas a day, and consumption

has increased about 21 percent over the past five years.

“Our proposed Front Range pipeline represents the largest opportunity in recent years for

our customers to have access to new gas supplies,´ said Bill D. Helton, Public Service Co.

chairman. “This will not only benefit our any residential and business customers, but it will enable our transportation-only customers to secure better and lower-cost supplies for their needs.”

The pipeline will benefit both large and small natural gas consumers, he said. It is a key

element of the company’s long-term plan presented to the Colorado Public Utilities Commission in 1994.

It will give the company access to six interstate natural gas pipelines at the Chalk Bluffs

“hub,” located near Rockport, Colo. Those pipelines include Colorado Interstate Gas Co., Williams Natural Gas Co., Wyoming Interstate Co., KN Interstate Gas Transmission Co., WestGas Interstate and Trailblazer Pipeline Co.

The proposed pipeline would have a 24-inch diameter and initial capacity of about 269,000 dekatherms per day. A dekatherm is a unit of measurement equal to 1 million British Thermal Units, or BTU. A BTU is the unit amount of heat required to raise the temperature of water by 1 degree.

The pipeline is expected to be in operation by Nov. 1, 1998. The Denver-Boulder market consumes 1.2 million dekatherms of natural gas a day, said Kurt Haeger, Public Service Co.’s gas supply and planning manager. The new pipeline could provide 20 percent of the demand for this area, he said.

The new pipeline is needed by the 1998-99 winter heating season to serve the company’s

dramatically growing markets and to provide greater access to abundant supplies of natural gas

available at the Chalk Bluffs hub, Haeger said.

“Our growth rate in this area has been around 3 to 4 percent a year,” he said. “The issue here is that we’re accessing the interstate corridor that goes between Colorado and Wyoming. We’ll get supplies for the growth of the system.”

Currently, Public Service buys gas supplies from other markets including Kansas,

Oklahoma and Texas that tend to be more expensive than gas from Colorado and Wyoming, he

said.

The proposed pipeline would make it possible to purchase more affordable gas from

wellheads in Colorado and Wyoming, Haegar said.

This proposed pipeline is one element of the alliance between Public Service and CIG,

which was formed to increase the access to natural gas supplies on the Front Range for gas

shippers and suppliers.

Public Service and CIG will each invest about $7.5 million in the deal. The project will use compression to increase capacity.

Haegar said natural gas costs overall are expected to decline with the new pipeline. The

pipeline will offer customers access to more competitive supplies along the Front Range, he said.

Industry deregulation has resulted in the accessing of multiple interstate pipelines and more competition. In the past, there was no incentive to access other pipelines since the pipeline operator also owned the gas that flowed in it, he said.

However, the deal must be approved by the state’s Public Utilities Commission, which

regulates the price Public Service can charge consumers. The PUC will examine the deal to make

sure consumers are not adversely affected.

Terry Bote, PUC spokesman, said the matter probably will be set for a hearing to consider the impact of Public Service’s participation on consumers and “whether they’ll have to bear the cost.”