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CL-2165 Work Session   Item #: C.       
Meeting Date: 08/08/2019  
Subject:    Transcontinental Pipeline Turn-Back Capacity Proposal
From: Jason Grey

COUNCIL ACTION
Work Session:     08/08/2019
SUMMARY
The Transcontinental Pipeline (Transco) proposes to take back the capacity the City has from Station 30 to Station 65 (see attached Transco map), or 2,875 DT of our firm transportation capacity, and swap it with Station 65 capacity.  In exchange for this option, Transco would commit to take back the Station 30 capacity and offer us a discount on the reservation rate that equates to $0.08/dekatherm.  They will help lower the natural gas commodity costs with an expected savings of approximately $83,950 per year.  The agreement with Transco would be for a ten-year term effective November 1, 2019, or the date Transco receives the necessary authorizations from Federal Energy Regulatory Commission (FERC).

Additionally, Transco would notify us by November 15, 2019, whether they will exercise a second option for the remainder of the Turn Back Capacity from station 45 to station 65 (an additional 4,227 dekatherms per day), and what the effective date of the turn back will be.  The effective date would be between October 1, 2020 and April 1, 2021, subject to receiving the FERC authorizations.  This action would help lower natural cost with an expected savings of $123,428 per year.  If Transco decides to exercise this option, this would also be structured as a 10-year agreement. 

This proposal assures an $83,950 annual savings at Station 30 beginning November 1, 2019, and the potential for an additional annual savings of $123,428 at Station 45 beginning between October of 2020 and April of 2021.  The total savings that would be passed through the purchase gas adjustment would be $207,378.40 if Transco elected to pursue the optional 4,227/dekatherms per day.
BACKGROUND
The City has received a proposal from the Transcontinental Pipeline that would grant them, as an option, to take back a portion of our utilized production-area capacity in exchange for a discount on our reservation rate. The portion of the "Turn Back Capacity" they are offering to take allows us to source 17% of our daily supply at its receipt point, Station 30 (see attached map).  The remaining receipt points of our contract, namely Stations 45, 50, and 62, make up an additional 25%, 19%, and 39% respectively.  At Station 65, our capacity is fully telescoped, and we can take 100% of our supply there.  For a number of years, we have sourced all of our supply at Station 65 and have not used the upstream receipt points.
RECOMMENDATION
Staff recommends that City Council approve Transco’s proposal of releasing 2,875 dekatherms per day of firm transportation capacity between stations 30 to 65 with an additional option of 4,227 dekatherms per day between stations 45 and 65.

Attachments
Resolution
Transcontinental Pipeline Map


    

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