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Enron Mail |
Talked with John Hodge further about the Transco Expansion from Zone 3 to 4
(Mommentum). Transco tossed out a rate of $.32 (100% load factor) plus 2.35% fuel plus $.026 commodity. If you assume fuel on a gas cost of $4.00 ($.095 fuel), then the total rate is $.44. Assuming the aforementioned rate, Southern Co.'s can pay Transco $.44 or purchase gas from Elba and backhaul on Sonat at a rate of $.22 which would netback to Elba at Hub +$.22. If you assume a basis of $.04 for gas on Transco Zone 3, then the netback goes up to Hub plus $.26. Note that a hard negotiation with Transco could net a better rate than $.44 and that this is only what they are proposing. However, I do not think we will get anywhere close to that with Southern Co. given that they can site generation in Zone 2 (Alabama) vs. Zone 3 (Georgia). Additionally, most power developers will not commit to a baseload quantity given that they will serving a peaking market. Our alternative is to sell to existing firm shippers on the Sonat system that would view Elba as a savings on variable cost on their FT agreement. The net is a Hub +$.10 at Elba assuming a basis of $.04 at Destin. Southern Co. has stated that a price of Hub +$.20 was out of the question. Probably between their bid of $.12 vs. Hub + $.20 is where we could strike a deal with them.
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