April 2009 Vol. 236 No. 4

Features

Keyspan To The Rescue Of Upstate New York LDC

New York City’s KeySpan Corporation is the largest gas company in the Northeast, with some 3.5 million customers. Corning Natural Gas Corporation has 14,500 customers in western New York state.

The two companies are separated by hundreds of miles and have little in common. But when it comes to the public interest, the two energy companies have proven to be good neighbors.

In September 2005, rising gas prices created a cash flow problem for Corning. “Our ability to obtain sufficient quantities of capital was impaired by the high price of gas, along with the new requirement from our suppliers that we had to pay in advance for our gas supply,” said Jerry Sleve, VP of Administration for Corning.

“That rise was exacerbated by the disruption of gas supplies in the wake of Hurricanes Katrina and Rita. Given our company’s rate structure, we couldn’t collect payment from our customers fast enough to meet the demand of our suppliers,” he said.

Under certain circumstances, the law permits the New York State Public Service Commission to require utilities to provide mutual aid in emergency. But when the PSC solicited assistance from utilities throughout New York, KeySpan stepped up to the plate, entering into a voluntary agreement to ensure that Corning had sufficient gas for this winter’s heating season.

KeySpan agreed to purchase gas from Dec. 1, 2005 through March 31, 2006 and sell it to Corning, with payment due 60 days from the invoice date. The contract called for KeySpan to charge Corning the price of the gas, plus interest.

KeySpan’s decision to come to Corning’s assistance was instantaneous. “KeySpan immediately agreed to do whatever it could to help,” said Catherine Nesser, Senior Counsel for KeySpan.

“We were pleased to be able to answer the call of the PSC to assist Corning Natural Gas,” said Robert B. Catell, Chairman and CEO of KeySpan. “We felt it was our responsibility as a sister utility, and appropriate to respond to the PSC and to the gas customers in Corning’s service area.”

The arrangement has worked well. KeySpan provided incremental supply of gas for Corning Natural Gas in December, invoiced them in early January, and was paid in full within two weeks. For Corning, this bridged the gap between supply delivery and payment time, just as in past years.

The voluntary mutual-aid agreement between KeySpan and Corning helped restore Corning’s credit line. ”All vendors have been paid on time, said Sleve. “As of Nov. 1, we met the PSC requirement that we have 90% of our supply in storage. Our lines of credit are open and our financial issues have been alleviated for the winter season.”

Corning provides gas to about 14,500 transportation customers in 15 townships in the Finger Lakes region of western New York state. The company has about 10,000 firm gas customers who consume about 5,500dth a day during the winter months. Its largest customer, Corning Incorporated, buys its own gas but depends on the Corning system for reliable delivery.

KeySpan Corporation, the largest distributor of natural gas in the Northeast, operates regulated gas utilities in New York, Massachusetts, and New Hampshire. On Feb. 24, it was announced that National Grid of the United Kingdom was planning to acquire Keyspan for $7.3 billion.

This is not the first time KeySpan has assisted other utilities. After major disruptions, it has helped Con Edison, which provides gas service to the New York City boroughs of Manhattan and the Bronx, restore service to customers. In September 2001, Keyspan provided logistical support to emergency workers at the World Trade Center. The company has sent crews to southern states to help with restoration efforts after devastating hurricanes.

KeySpan’s assistance to Corning is in keeping with a long heritage of support within the natural gas industry. “Natural gas utilities have a heritage of providing mutual aid and support to each other, which flows from their commitment to reliable service,” said Peggy Laramie, director of public relations for the American Gas Association.

For example, even under the extreme conditions created by the hurricanes of 2005, she noted that CenterPoint Energy and Mobile Gas were able to solicit member companies of the Southern Gas Association and AGA for meters, pipes, and transportation to help in the effort to restore gas service to areas of the Gulf Coast devastated by Katrina and Rita.

“Such coordination and cooperation is not only vital to restoration efforts, but also it also helps energy utilities to refine and expand their contingency plans,” she said.

“We are extremely grateful for KeySpan’s cooperation,” Sleve said. “It was beneficial to KeySpan and beneficial to us. I thank your executives for their cooperation, and especially credit Melissa Nairn, who planned and purchased Corning’s gas supply, and Cathy Nesser, the point people who made this agreement possible.”