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IID considers buying into natural gas well field to fight hikes

April 06, 2001|By DARREN SIMON, Staff Writer

With the cost of producing power for the Imperial Valley on the rise in the wake of higher natural gas prices, the Imperial Irrigation District directors are exploring a new way to control costs.

IID board President Andy Horne said the district is looking at purchasing interest in a natural gas well field to become its own supplier and keep the district from falling prey to the volatile gas market.

The district uses natural gas as the fuel source for its power plants.

This summer IID customers can expect higher-than-usual power prices because the price of natural gas will be more than two times higher than last summer.

Earlier this year IID locked in a price for natural gas at $7.90 per million BTU. Last summer the district was paying just over $2 for the same amount of natural gas.

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While the higher price means power customers will pay more this summer, IID officials have said it could have been worse if the district did not lock in that $7.90 price.

At times this year natural gas has risen to $50 per million BTU.

"The volatility of the gas market has caused us to seek options to locate a stable supply and price for gas," Horne said this morning.

Horne said it would cost hundreds of millions of dollars to purchase interest in a well field. He said to do so IID would have to seek bond financing to cover the cost and the district would have to pay off the bond annually.

He said the move would only be worth it if the cost of paying off the bond was less than what the district would pay for natural gas on the open market.

This year IID is paying about $49 million for the gas, up from the $20 to $25 million the district paid last year.

For the last month the district has been studying the issue "seriously," Horne said, adding the district may move quickly on the issue this month.

The board will discuss the issue during its meeting Tuesday in the IID auditorium in El Centro. The public session starts at 5 p.m.

Horne said IID is investigating a specific well field, although he declined to say where that field is.

He said the issue is sensitive because IID would have to bid on the well field and bids must be submitted by the end of this month.

There are a number of issues the district must decide upon in short order. The board and staff must consider the yield of natural gas that could be provided by the well field and how the district would transport the gas.

Still, Horne said it could be a viable option because it would mean IID would no longer have to pay to purchase natural gas.

IID General Manager Jesse Silva said the well field is one option for the district to explore, but he said there are others.

Silva said the district could look at securing a long-term contract to purchase natural gas from a supplier.

However, he said IID likely would not do so at this time because of rising prices in natural gas market. He said in the next two years the cost of gas could fall to $4 or $5 per million BTU.

Silva added the idea of purchasing interest in a well field is interesting because it was not necessary to look at such options in the past.

Staff Writer Darren Simon can be reached at 337-4082.

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