NEW YORK, Aug 27 (Reuters) - Gulf South Pipeline Company LP, a unit of Boardwalk Pipeline Partners LP, has filed with energy regulators to provide power generators more flexibility to take gas out of storage during summer months, underscoring how the growing supply of the fuel continues to structurally redesign the electric-power market.
The proposed plan will give its customers, which include power generators, more flexibility in drawing natural gas from underground storage in summer, including hourly deliveries of gas for a portion of a customer’s daily use to meet demand.
Gulf South filed a request with federal energy regulators earlier this month to implement a new fee schedule for customers who ship gas on the line and to obtain a lease from Petal Storage, also a subsidiary of Boardwalk, since the Gulf pipeline is thin on storage space itself.
The company did not immediately return a call seeking comment.
“While the ultimate level of market growth is unknown, it is clear that demand for natural gas is growing,” the company wrote in the Aug. 13 filing to the U.S. Federal Energy Regulatory Commission.
Both coal and nuclear power plants have come under increased financial pressure from the ballooning volumes of natural gas that have sunk prices, leaving power generators to switch on the gas plants.
On Tuesday, Entergy announced it was closing its Vermont Yankee nuclear power plant, citing high costs and low power prices.
As natural gas prices sank to a 10-year low last year “the nation’s fleet of natural gas-fired, combined-cycle plants was more heavily used than at any time in the past decade,” FERC noted in a report. Daily U.S. natural gas demand grew 4 percent to 70 billion cubic feet per day in 2012, the highest level on record, FERC said.
Gulf South’s proposal illustrates how providers of natural gas services are working with electric generators to develop new services to meet their needs as the U.S. power generation landscape changes, said Curt Moffatt, a partner who specializes in energy regulation with law firm Van Ness Feldman in Washington, D.C., who is working on the Gulf South proposal.
“People are continuing to think about it and continuing to talk with the various types of generators,” he said. GAS REPLACES COAL
Inventories of natural gas historically have been built up during summer months to burn to meet peak demand during winter-heating season. Power generators have generally met the nation’s summer electricity needs by burning coal.
Storage operators in the so-called “producing region” or Gulf Coast have been known to take out gas from underground salt cavern domes during peak summer demand. It’s easier to pull supplies from salt domes than other types of storage caverns.
The summer of 2006 was the first and only time two near-consecutive nationwide net withdrawals were recorded during the season, historical data from the U.S. Energy Information Administration shows.
That could be on deck if electric providers continue to drain supplies to support air-conditioning demand, depending on how hot the summers get.
A huge wave of coal plant retirements slated for 2015 could bring among more nationwide summertime draws, said Kyle Cooper director of research for natural gas energy consultancy IAF Advisors in Houston.
“Is it going to become common to see summertime draws beyond that? It’s entirely possible,” he said.
Gulf South is a 7,240-mile interstate pipeline system with peak delivery capacity of 6.8 bcf/d that gathers gas from shale plays in the U.S. Southwest to deliver into markets along the Gulf Coast and Southeast.
Boardwalk Partners is a midstream master limited partnership that provides transportation, storage, gathering and processing of natural gas and liquids. The company is majority owned Loews Corporation, which owns and operates a hotel chain by the same name.
Loews is also majority owner of oil and gas drilling rig operator Diamond Offshore Drilling, Inc and full owner of natural gas producer HighMount Exploration & Production LLC.