Eastern Shore Natural Gas enters into precedent agreement with Calpine Energy Services

Chesapeake Utilities Corporation’s natural gas transmission subsidiary Eastern Shore Natural Gas Company (ESNG) has entered into a Precedent Agreement with Calpine Energy Services, L.P., whereby Calpine is committed to enter into a 20-year service agreement with ESNG to provide natural gas transportation service for Calpine's new, state-of-the-art electric generating facility located in Dover, Delaware, upon the satisfaction of certain conditions. The agreement calls for ESNG to transport 45 000 dkth/d of natural gas along ESNG's mainline to a pipeline that will service Calpine's Garrison Energy Centre, a 309 MW combined cycle power plant currently under construction in the Garrison Oak Technical Park.

The transportation service will be provided under ESNG's new Off Peak =90 Firm Transportation (OPT) Rate Schedule. The new OPT service was approved by the Federal Energy Regulatory Commission (FERC) on 5 September 2014. ESNG estimates that it will generate at least US$5.8 million of margin annually from providing the OPT service to Calpine. The OPT is a firm service that enables customers to save money by forgoing service for up to ninety days each year. By the customers forgoing the service on the peak days ESNG is able to reduce its investment and rates to the customer. Calpine's Garrison Energy Centre will have dual fuel capability to help mitigate the effects of any potential gas interruption during those ninety days.

"This agreement reflects our extensive work with Calpine to develop a solution that meets its needs and provides us the opportunity to expand our pipeline infrastructure to the area," said Michael P. McMasters, President and CEO of Chesapeake Utilities Corporation. “The expansion supports our efforts to meet the energy needs of the region as demand for economic and environmentally friendly natural gas increases on the Delmarva Peninsula. Building pipelines to bring natural gas to electric generation plants is one of our identified strategies for future growth."

As a result of the agreement, ESNG recently submitted an application for a Certificate of Public Convenience and Necessity to the FERC. ESNG plans to expand its facilities with the installation of over seven miles of 16 in. pipeline looping and 3550 horsepower of new compression in Delaware. These new facilities are estimated to cost approximately US$30 million. ESNG anticipates receiving FERC's authorisation in 2015. Service is targeted to commence in the 4Q15, following FERC authorisation.

In addition, ESNG recently completed a pipeline project pursuant to a separate previously executed agreement, which consisted of approximately five and a half miles of new pipeline that connects its existing mainline near Cheswold, Delaware to the Calpine Garrison Energy Centre. Service was initiated in October of 2014. As a result of constructing this pipeline and commencing service, ESNG expects to generate approximately US$463 000 in gross margin during 2014 and approximately US$1.5 million in gross margin on an annual basis from Calpine.

Adapted from press release by Rosalie Starling

Read the article online at: https://www.worldpipelines.com/business-news/16122014/eastern-shore-natural-gas-enters-into-precedent-agreement-with-calpine-energy-services-1126/