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City BPU Officials Discuss Natural Gas Pipeline

Standing, Kris Sellstrom, Jamestown Board of Public Utilities electrical engineer, discussing the natural gas pipeline the BPU was approved to purchase from EmKey Transportation. P-J photo by Dennis Phillips

Following the state Public Service Commission approval for the Jamestown Board of Public Utilities to purchase a natural gas pipeline last month, BPU officials discussed the history of the pipeline at the city-owned utility company Monday.

Kris Sellstrom, BPU electrical engineer, delivered the presentation on the pipeline, which BPU officials were first interest in when they became more involved in wanting natural gas supplied to the Steele Street Samuel A. Carlson Electric Generating Station in 1998. He said BPU officials asked for proposals from suppliers, which started a new era for the former coal burning electric station. From the different proposals received to supply the BPU with natural gas, city officials selected Nornew Energy Supply to provide the BPU with natural gas from the Tennessee Gas Pipeline. Sellstrom said in 2001 that the BPU started preparing for the use of a natural gas turbine at the Steele Street location.

By 2011, Nornew became EmKey Transportation, Sellstrom said. In 2014, BPU officials started looking at a new lease renewal with EmKey with the current contract set to expire in 2020. He said EmKey officials wanted more than a million more annually from the BPU during the negotiations for a new lease contract. At this point, BPU officials examined the idea of buying the pipeline instead of leasing it, Sellstrom said.

In 2015, negotiations started on the possible BPU purchase of the pipeline, with EmKey officials wanting more than $12 million for the natural gas supply line. In 2016, BPU officials negotiated the sale price down to $5.4 million, Sellstrom said.

In 2017, the BPU submitted a proposal to the state Public Service Commission to purchase the pipeline. However, the PSC denied the petition. In 2018, BPU officials resubmitted the petition to purchase the pipeline, which was approved by the PSC last month.

Sellstrom said as part of the pipeline purchase, the BPU also bought a 400 horse power compressor, which is located in Mayville. The compressor assist in the movement of the natural gas from Mayville to the electric generation station on Steele Street in Jamestown.

Sellstrom said now BPU officials have to receive training staff on the pipeline and they need to work with EmKey officials to transfer shared services. He said BPU need to set up new controls and communications so they can see what is happening with the pipeline compressor from Jamestown. He also said BPU officials will also be examining how to reduce the four-hour delay in heating up the compressor in order to transport natural gas to Jamestown.

Last month, the PSC approved the BPU’s second petition to purchase the natural gas pipeline for $5.4 million. BPU and EmKey Transportation officials are working to finalize the sale of the pipeline that has been in use since 2001 when the city-owned utility began to operate gas-fired equipment, which includes the LM6000 gas turbine generator.

In September 2017, the PSC ruled against the first sale petition. In last year’s decision, the PSC stated the $5.4 million purchase price for the pipeline was greater than what was originally considered the net book value of $2.5 million. However, in the most recent decision, the PSC stated more documents and analysis was provided to support a net plant value of $5.9 million of the pipeline, which is $500,000 above the purchase price.

David Leathers, BPU general manger, said last month during the review process of the original petition, the PSC had questions, which both BPU and EmKey officials provided. However, Leathers believes EmKey didn’t provide the correct information.

“That is why the PSC ruled the way they did in September 2017. Subsequent to that EmKey provided the correct information the PSC was looking for and the PSC reviewed and acknowledged the original purchase price,” Leathers said.

Leathers said another reason the PSC agreed the second time was BPU officials sent out request for proposals to operate and perform maintenance on the pipeline and equipment. During the competitive bidding process, the winning bid was submitted by Douglas Pipeline Company for $19,250 a month, which the BPU board approved Monday.

During the first petition, BPU had agreed to have EmKey Gathering operate and perform maintenance on the pipeline and equipment for $25,000 a month.

“When we went out to bid, Douglas was awarded a five-year agreement that was under $20,000,” Leathers said. “That is savings and the PSC gave us a good recommendation because it is savings for our customers.”

Since around 2000, the BPU has been paying EmKey $56,500 a month for use of the pipeline during the 20-year lease, Leather said. The rental payment was calculated into the fuel cost adjustment, which was charged to BPU customers. However, once the BPU owns the pipeline, the PSC calculates that customers will only be paying around $54,000 a month through the fuel adjustment cost.

Under the contract, the BPU will become the owner of approximately 27 miles of underground pipeline and associated equipment which includes a natural gas fuel compressor located in Mayville and its interconnection to the Tennessee Gas Pipeline, which is a major interstate system used to transport natural gas from facilities located in southern states such as Louisiana to northeastern states such as New York and Massachusetts.

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