PG&E to Expand Pacific Northwest System

Responding to tight energy supplies in the Pacific Northwest and California, 
PG&E Corp.'s National Energy Group revealed plans Wednesday to begin an open 
season early next year, kicking off a five-year expansion effort. The first 
phase would add 200 MMcf/d of firm transportation capacity out of western 
Canada on its Gas Transmission-Northwest (GTN) pipeline system. The PG&E GTN 
group expects the phase one expansion to be in service by November 2002 at 
the latest. 

"As we have been anticipating, the western natural gas market is at a 
critical point in the need for additional pipeline capacity," said Thomas B. 
King, president of the PG&E National Energy Group (PG&E NEG) West Region. 
"Gas supplies into the Pacific Northwest and California are very tight. At 
the same time, the market is strong and growing, and the PG&E Gas 
Transmission Northwest pipeline system has been operating at or near maximum 
capacity levels for the greater part of the year. We believe GTN is now 
positioned for an aggressive expansion period that will result in additional 
supplies of natural gas --- at competitive transportation rates --- in this 
region for both direct-use customers and electric generation by 2002." 

King noted that the phase one expansion of the GTN system was brought on 
primarily because of the state of disarray in the California market. He cited 
the growing use of gas to fuel electric generating facilities as the main 
reason new capacity is needed. 

King added that the GTN pipeline system is the most direct and economic link 
for tapping the Canadian production basins, and bringing the load to 
California and the Pacific Northwest markets. He also emphasized that the 
expansions would help the market prepare for new supply from Alaska. 

"We are constantly talking to our customers about what is the right time for 
us to expand our pipeline system," said Sandra McDonough, spokeswoman for 
PG&E Corp. "With the power plant development both in California and in the 
Pacific Northwest, including plants in the Northwest that are being built 
right next to our pipeline, the time is clearly now to start expanding the 
system. We have gotten more bids for capacity than we have been able to move 
recently." McDonough told Daily GPI last week that the company was looking to 
expand its mainline in the near future (see Daily GPI, Dec. 13). 

To gauge demand, PG&E NEG plans to launch an open season for the 200 MMcf/d 
expansion of the mainline beginning on Jan. 2, 2001. Bids are due by Feb. 15, 
2001. Following the open season, the company will hold a capacity 
rationalization period, which will allow existing shippers to release 
capacity directly to customers who have expressed an interest. 

The 612-mile dual pipe GTN system begins at the Idaho-British Columbia 
border, travels through northern Idaho, southeastern Washington and central 
Oregon, and terminates at the Oregon-California border where it connects with 
the Pacific Gas and Electric Co. intrastate pipeline system. 

Currently, the GTN system is the largest U.S. transporter of Canadian natural 
gas with 2.7 Bcf/d of capacity. The expansion was deemed necessary because 
the average contract term on the line extends through 2013, and the pipeline 
has been operating at capacity, or near capacity for most of 2000. The method 
of expansion had not been decided on yet, but it is expected to include 
additional compression and some looping. 

McDonough said PG&E has been in contact with its upstream providers including 
TransCanada Pipelines Limited (TCPL) to ensure coordination of capacity. Doug 
Baldwin, CEO of TCPL, said TransCanada will work with PG&E NEG to examine 
and, if appropriate, satisfy the needs of market participants in both the 
western United States and Canada. 

If response to the open season is adequate, PG&E NEG hopes to move along with 
the project immediately. The November 2002 in service date includes an 
anticipated one-year process to obtain a Federal Energy Regulatory Commission 
(FERC) permit. 

"We also expect to have an incremental 265 MMcf/d of new direct-connect 
gas-fired electric generation load along the GTN system in the Pacific 
Northwest by mid-2002," King said. "We expect to follow the 2002 project 
immediately with additional pipeline expansions to meet the need for 
additional gas supplies in the Pacific Northwest, on both the east and west 
sides of the Cascade Mountains." 

For the next five-to-eight years, PG&E Corp. expects to be busy with pipeline 
expansions and new additions. The company has planned a second mainline 
expansion to be in service in 2004, with a new interconnect near Spokane, WA, 
which will serve the Puget Sound/Seattle area. The last expansion phase will 
be brought online sometime after 2005. With Alaskan gas fields expected to be 
ready for commercial service in the next five to 10 years, PG&E NEG will 
build an expansion that will facilitate transportation of gas from Alaska and 
Canada's Northwest Territories to markets in the lower 48 states. 

"Overall what we are looking at is the potential to expand the system by 1 
Bcf/d over the next decade," McDonough said. 


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