Chesapeake Utilities Corp. (NYSE: CPK) said Dec. 12 that its gas transmission subsidiary Eastern Shore Natural Gas Co. (ESNG) has entered into a Precedent Agreement with Calpine Energy Services LP under which Calpine is committed to enter into a 20-year service agreement with ESNG to provide natural gas transportation service for its new Garrison power plant in Dover, Delaware, upon the satisfaction of certain conditions.
The agreement calls for ESNG to transport 45,000 dekatherms per day (dt/d) of natural gas along ESNG’s mainline to a pipeline that will service Calpine’s Garrison Energy Center, a 309-MW combined cycle 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 on Sept. 5, 2014. The OPT is a firm service that enables customers to save money by forgoing service for up to ninety days each year. This allows ESNG to reduce its investment and rates to the customer. Calpine’s Garrison Energy Center 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. “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-inch pipeline looping and 3,550 horsepower of new compression in Delaware. ESNG anticipates receiving FERC authorization in 2015. Service is targeted to commence in the fourth quarter of 2015.
In addition, ESNG recently completed a pipeline project pursuant to a separate previously executed agreement, which consisted of approximately 5.5 miles of new pipeline that connects its existing mainline near Cheswold, Delaware, to the Garrison Energy Center. Service was initiated in October 2014.
Eastern Shore Natural Gas owns and operates a 437-mile interstate pipeline that transports natural gas from various points in Pennsylvania to customers in Delaware, Maryland and Pennsylvania.
Incidentally, besides the 309 MW of capacity now under construction at Garrison, Calpine is working at PJM Interconnection for an agreement to connect a second 309-MW project phase to the grid that could go on-line later this decade.