Although no action was taken on the item, Florida Gas Utility (FGU) General Manager and CEO Tom Geoffries presented to the council an opportunity through Peninsula Pipeline Company to save money on natural gas at its Jan. 13 meeting.
“Century is a member of Florida Gas Utility, provide various services to town, one is to help on various projects,” said Geoffries. “This is to get connected to second pipeline system that will save the town and citizens money.”
Geoffries said currently, Century receives natural gas from Gulf South through FGU's pipeline system on a pay as you go rate, only paying for the space in the pipe used on a daily basis, about $1 per dekatherm, the unit natural gas is purchased in.
Using slides, Geoffries explained that the town could save money, comparing the cost of 46 cents a day dekatherm and capacity versus the current cost of about $1 for the two with Gulf South, for about a 50 percent saving. There is a minimum take requirement of 273,000 dekatherms over the first five years so that Peninsula Pipeline can get a return on its investment, he said.
Peninsula Pipeline is proposing to build its share of the city gate station, which would normally cost Century about $150,000 to $250,000, because it is usually paid by the customer at no cost to Century. To connect into the current distribution system, he said his company is also proposing to build Century's share and Century would purchase materials to make the connection, a $50,000 to $75,000 cost.
“This is a discounted natural gas supply, which consists of long term natural gas supply deals that have significant discounts to market prices,” said Geoffries. “Municipal Gas Authority of Georgia is identical to Florida Gas Utility in that each is a joint action agency that services municipal members in each state, respectively. Three to 5 years is normally considered long-term, but with this opportunity, primary terms is a 30-year commitment, it's required to get the discounts, and it's only available to municipal systems, not to investor-owned systems, because of the tax laws.”
He said this system is an intrastate pipeline, regulated at the state level, unlike interstate pipelines, such as Gulf South and Florida Gas Transmission, which are regulated at the federal level. He noted this difference can reduce the capacity cost paid on pipeline systems.
Geoffries also said that the capacity will come from neighboring town of Jay with total capacity cost of 46 cents per Dekatherm, which is 40 cents for the actual gas plus 6 cents for transmission of the gas. The contract would require a 180-day notice to terminate, with no fee. He said if the town sold its delivery system, the town has the choice to terminate or the new system owner could pick up the service.
Geoffries said the offer is time-sensitive and added that there are only two things required: for the town to execute two directives that indicate the town is interested in participating and to approve pre-determined quantities to be purchased from Royal Bank of Canada and MacQuarie for years one through five and years six through 30, on a 30-year contract.
“The combination of these two are very good cost savers for the town, about a 50 percent savings from what you are paying today,” he noted.
“It's a useful asset, and whoever acquired your system would want it and it has value,” said Geoffries. “Having connections to two pipelines is always better than one.”
Council members determined that town attorney Matt Dannheiser had not seen the agreement Geoffries presented to the council, although he has seen the directive for the Peninsula Pipline gas supply.
Councilwoman Ann Brooks asked Geoffries about what she understood was the initial rate in the contract Century has with FGU, which was $500 monthly, or $6,000 per year, but is now $1,200 a month. Brooks asked what the town could expect in the future for the increased monthly payments.
“Now we are able to do much more for you, because we weren't able to do very much for you,” said Geoffries. “We are negotiating agreements, we are getting you connected into other pipelines, we are bringing discounted supply to you, we are helping Wally with his meter change-out and operational issues, so we are providing services to you, they just are not gas supply currently, until you get connected into Peninsula Pipeline, because of your contract with BP.”
“I want to be careful entering into these agreements, because we just found ourselves in a bad position,” said Brooks. “We have those two agreements with City Services, the consulting and monitoring agreement, and the regulatory compliance agreement, and we've entered into this agreement with you, and didn't properly cancel these, and so right now, we're bound by agreement with you and City Services.”
The item was tabled until at least the next council meeting on Monday, Jan. 28 so that further review of the plan could take place.
