Battle Waged by Ong over Cogeneration Plant

Article excerpt

Another battle over industrial natural gas customers has been launched by Oklahoma Natural Gas Co. against Williams Natural Gas Co. - this one stemming from a cogeneration plant at the Conoco Inc. refinery in Ponca City.

ONG, a division of ONEOK Inc. of Tulsa, filed a protest May 11 in Williams' pipeline certificate application at the Federal Energy Regulatory Commission to transport up to 18 million cubic feet of gas per day to the Ponca City plant.

There are three lawsuits tracking in a similar controversy between ONG and Williams stemming from the Smith Cogeneration Inc. plant at Firestone Tire & Rubber Co. in Oklahoma City. A yearlong court battle erupted in the fall of 1988 over the Oklahoma City plant, and appeals still linger.

At the crux of the issue - referred to as bypass - is the transportation of natural gas to industrial end-users by interstate pipelines such as Williams, resulting in the loss of or lack of a new customer to local distribution companies such as ONG.

The 52-megawatt cogeneration plant in Ponca City is being built by Oklahoma Gas & Electric Co. and is due to go into operation in 1991. Conoco will be the beneficiary of steam produced by the cogeneration plant. Electricity generated will be inserted into OG&E's power grid.

In the agreement between Conoco and OG&E, Conoco is responsible for providing natural gas to the power plant. The commodity is being bought from Brandywine Industrial Gas Inc., a wholly-owned production subsidiary of Conoco, and Williams has been contracted to transport it to the plant. Hence, Williams plans to build a 12.3-mile, $2.3 million spur off its interstate pipeline to the cogeneration plant.

Currently, ONG is transporting gas to the Conoco plant, but lost out in an open bidding process to Williams. ONG said it could serve the cogeneration plant with a $60,000 upgrade of its existing facilities at Conoco.

Williams, a subsidiary of The Williams Companies Inc. of Tulsa, maintains that as an interstate pipeline it is solely regulated by the Federal Energy Regulatory Commission. Because the gas in question is being inserted into Williams' interstate pipeline system, the company says it is moving in interstate commerce.

Conversely, ONG claims a spur off Williams' interstate line to serve an industrial customer consitutes a local distribution system that would come under the oversight of state regulators. The utility notes that Williams is serving some 79 customers in Oklahoma.

"Oklahoma Natural is not afraid of fair competition," the utility's protest states.

However, the utility asserts it is concerned about competition from companies that are not regulated by the Oklahoma Corporation Commission, as is ONG. The utility claimed that as much as $50.5 million in revenues are at risk to being lost to bypass. This potential loss, ONG said, would result in a 16.5 percent increase in ONG rates.

Federal Energy Regulatory Commission policy has been to allow bypass to foster competition in the natural gas transportation arena so long as local distribution companies are not precluded from competing as well.

John Cary, attorney for Williams, said ONG was not discriminated against in the bid to serve Conoco. …