Southern Co studies gas pipeline investment

OREANDA-NEWS. February 05, 2015. Power generator Southern Co. is looking at potential investments in natural gas infrastructure projects, joining a handful of other US utilities that expect to become more reliant on gas-fired generation as stricter environmental rules are implemented.

Southern chief executive Tom Fanning said Southern's utility units have tapped much of the available gas pipeline capacity to supply gas plants serving its US southeast system. Increased gas consumption will require more infrastructure and the company is looking to play a role.

Fanning said he would expect Southern utilities to be an anchor tenant in any pipeline pipeline project they invest in.

"We see lots of price disparity for gas transportation from the east side to the west side of our system," Fanning told analysts on an earnings call today.

Duke Energy and NextEra Energy are also investing in pipeline projects. NextEra's Florida Power & Light and other utilities are going further, investing in gas reserves or production to meet their future fuel needs.

In 2014, gas and coal each supplied 40pc of the energy produced by Southern utilities, compared to 41pc gas and 38pc coal in 2013.

But the annual statistics mask Southern's fuel flexibility, Fanning said. During 2013's extreme winter weather period when gas prices soared, Southern was able to increase output from its coal-fired generation, saving an estimated \\$125mn.

Conversely, in the final quarter of 2014, Southern ran more gas-fired plants as the price slumped. Gas output jumped to 49pc in October-December 2014 while output at coal-burning units fell to 31pc. That compares to 42pc for gas and 37pc for coal output in the final quarter of 2013.

Looking ahead, Southern expects gas to account for 44pc of energy and coal at 36pc in its service territory.

Round-the-clock assessments for Southern territory are \\$30/MWh for 2016 and are gaining 3pc by 2020. Spark spreads for 7 mmBtu/MWh units average \\$8/MWh for Calendar-2016 and drop to \\$4.40/MWh in 2020.