NEW YORK - KeySpan Corp. believes natural gas is an answer to Long Island's 36 year search for energy and is participating in four pipeline projects which will deliver nearly one billion cubic feet of gas daily to New York City's eastern suburbs.
Completion of all four pipelines would increase KeySpan's capacity to deliver natural gas on Long Island by roughly 50 percent, filling the gas mains the utility is building at the rate of 200 miles (322 km) per year and providing fuel for 500 megawatts of new generation proposed for construction over the next few years.
Long Island's power problems were demonstrated again this month when a heat wave strained the island's resources.
"The loss of a tie line or major resource could have pushed us over the edge and into rolling blackouts," said Long Island Power Authority (LIPA) Chairman Richard Kessel last week.
Without increased suppliers and conservation, he said, "we will not make it through a similar heat wave next year."
The problems can be traced to the Serviceman's Readjustment Act of 1944. Better known as the GI Bill, it funded education and guaranteed no-money-down mortgages which resulted in low-cost financing that converted Long Island's potato fields into housing developments.
Two decades after the buyers started moving into the homes, the search for increased energy turned to nuclear power and in 1973, the Atomic Energy Commission approved Long Island Lighting Co.'s (LILCO) plant at Shoreham.
While the nuclear plant was being built, expansion of gas systems across the country, including LILCO's, was halted by regulators afraid of a gas shortage.
Although the plant was approved by regulators, community opposition kept it from operating, leaving new homes on Long Island to be heated by oil.
Even though Shoreham never operated, its $4 billion cost was passed on to ratepayers, leading to the takeover of LILCO's electricity distribution system by LIPA, a state-owned utility, in 1998 when the rest of the company was merged with Brooklyn Union Gas to create Keyspan.
GAS MARKETING SUPERPOWER CREATED
Besides power plants, the merger added LILCO's gas distribution operations serving 400,000 customers to the 1.1 million already served by Brooklyn Union on Staten Island, in Brooklyn and in parts of Queens.
At that time, 38 percent of Long Island homes with gas available were using it for heat. In the New York City areas served by Brooklyn Union, nearly 80 percent of the homes served by gas mains were using the fuel for heat, Wally Parker, president of KeySpan Energy Delivery Group, said.
In contrast, Consolidated Edison Inc. , which delivers gas in the rest of the city, does not know how many residences its gas mains pass, spokesman Michael Clendenin said.
Of the 720,000 residential gas customers Con Edison does serve, less than 31 percent use the fuel for heating. The rest use it only for cooking and water heating.
But nearly 80 percent of the home heating market is not enough for KeySpan, Parker said.
The company's target is "nearly 90 percent" on Long Island and in New York City, he said.
In the first six months of 2001, KeySpan said last month, it converted about 200,000 homes to gas heat, adding $25 million in annual gross profit margin or more than 20 percent over the first half of 2000.
In all of 2000, KeySpan added $35 million to gross profit margin through conversions on Long Island and in New York City.
TWO HUNDRED MILES OF MAINS
Through the first half of the year, KeySpan is 8 percent ahead of its goal of adding $60 million to its gross profit margin in 2001 through gas conversions on Long Island and in the Boston area where the company acquired two utilities last fall.
The mergers made KeySpan the largest gas distribution company in the U.S. Northeast some 3.0 million customers.
To provide for future conversions, Parker said, "over 1 million feet" or 200 miles of new gas mains were installed on Long Island last year.
Noting over 65 percent of Long Island has no gas mains, he said another 15 million to 18 million feet of mains will have to be installed to bring mains within 100 feet of every residence on the Island.
To supply its new customers, KeySpan has joined with Duke Energy to propose three new pipelines expected to cost over $300 million, including Long Island's first link to the gas reserves in Canada's Maritime provinces. This link would come through the Islander East pipeline proposed in January to deliver 250 million cubic feet of gas daily under Long Island Sound starting in 2003.
KeySpan and Duke are also jointly expanding Transco's link to the Island that crosses New York Harbor from Old Bridge, N.J., to deliver gas from the Southwest and Gulf of Mexico. The expanded system will be known as the Cross Bay pipeline and be owned 37.5 percent each by Duke and Transco's parent, Williams Cos. , and 25 percent by KeySpan.
The first phase of the expansion is expected to deliver an additional 125 million cubic feet of gas a day to Long Beach Island starting in December 2002.
KeySpan also has a 20.4 percent in the Iroquois pipeline which delivers Western Canadian gas to the New York area and has proposed two links to Long Island.
Story by Jim Brumm
Story Date: 21/8/2001