Natural gas marketer is canceling contracts with regional users

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Natural gas marketer is canceling contracts with regional users Source: KANSAS CITY STAR Publication date: 2000-10-05

KANSAS CITY, Mo. - A marketer of natural gas is canceling contracts to provide fuel at fixed rates to Fort Riley, Kansas State University, GST Steel and dozens of other commercial users of natural gas in Kansas and Missouri. The company, Mountain Energy Corp., said a dispute with its main gas supplier meant it wouldn't be able to supply gas under the terms agreed to with 62 customers. Options have been offered to ensure they will continue to receive natural gas, but almost.

Less affected are nearly 700 other Mountain Energy customers, including the Shawnee Mission School District. They will not see their contracts terminated, but they probably will be transferred to another company, said Michael Eichenberg, president.

"We're going to be out of the retail gas business after October," he said.

Bruce Hultman, the district supply-center supervisor for Shawnee Mission schools, said he began hearing rumors late last week that there might be problems at Mountain Energy. He made inquiries and confirmed that the school district would continue receiv "We're monitoring the situation, and there's been no problem," he said.

But many of the 62 customers who found out this week that their fixed-rate contracts were void were stunned. Generally, they have until the end of the week to make supply arrangements with their local utility or another marketer, or stick with Mountain Mountain Energy has offered to help customers with the extra costs. But at least some of its customers are saying they are looking at paying substantially more for gas than they had expected as recently as last week.

"It is significantly affecting our operations," said Dave Edwards, a vice president with GST Steel.

Mountain Energy is one of a new - and relatively small - breed of marketing companies formed to take advantage of natural gas deregulation, which began in the 1980s. In Kansas and Missouri, for example, large commercial users of natural gas have the opt Mountain Energy's problems revolve around a dispute with Anadarko Energy Services, the gas marketing subsidiary of Anadarko Petroleum Corp. of Houston. Neither Anadarko nor Mountain Energy would discuss details of the dispute.

But soaring gas prices appear to have played a role. A letter Mountain Energy sent to its customers said the dispute was over how it had hedged its accounts. Hedging puts a cap on how much is paid for gas. The technique has gained importance because gas Mountain Energy has given three options to the customers with contracts it can no longer honor.

The first is to do business with a different marketer. The second is to return to their local utility. The third is to be supplied by Mountain Energy, which says it can obtain gas, but not at the fixed price it had agreed to. The customers who stay with Fort Riley said in a news release Wednesday that no employees or residents at the post would be affected. Arrangements have been made through Mountain Energy to continue receiving gas from Anadarko Energy Services.

Whatever option a customer chooses, Mountain Energy said, it has offered to pay a substantial portion of the extra costs incurred by most of its customers.

Most of the customers are in Kansas. The state's largest utility, Kansas Gas Service, said Wednesday that it was ready to serve any of them that are in its service territory. They would, however, have to agree to an annual contract.

Missouri Gas Energy in Kansas City said it would consider serving Mountain Energy's customers in its territory that asked to switch, but its decision would depend on whether it had the capacity to serve them.

Meanwhile, Mountain Energy customers are reviewing their options. K-State is putting the amount of natural gas it needs back out to bid.

Ed Rice, a K-State vice president, said he had no indication that there was a problem until he received a fax from Mountain Energy at 4:20 p.m. Tuesday.

"It made my day," he said.

http://cnniw.yellowbrix.com/pages/cnniw/Story.nsp?story_id=14526820&ID=cnniw&scategory=Energy%3ANatural+Gas

-- Martin Thompson (mthom1927@aol.com), October 06, 2000

Answers

Suprise, Suprise!

-- Martin Thompson (mthom1927@aol.com), October 06, 2000.

This is the first move like this I've seen. I expect a lot more to come.

-- Wellesley (wellesley@freeport.net), October 06, 2000.

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