BLP enters into natural gas contract
MARQUETTE — The Marquette Board of Light and Power board unanimously approved entering into a natural gas wholesale price agreement with multinational oil and gas company BP during a special meeting Tuesday afternoon.
BLP Board Member Jerry Irby was absent from the meeting.
Since the coal-fired Shiras Steam Plant was taken offline in early June, natural gas has become the primary fuel used for the Marquette Energy Center, the BLP’s new leading generating facility.
The MEC’s three 18-megawatt reciprocating internal combustion engines run daily from around 7 a.m. to 10 p.m. The BLP also sources energy from the electric grid during hours when the prices are generally lower.
In a letter presented to the board, BLP Director Tom Carpenter said to secure a reliable supply and help ensure natural gas prices remains stable throughout the next fiscal year, it’s necessary to establish an agreement with a natural gas supplier.
“Natural gas is a commodity that is traded at a number of ‘hubs’ around the country. In order to procure gas for the MEC, suppliers will purchase wholesale gas and transport it through the interstate pipeline system to Marquette,” Carpenter’s letter reads. “Natural gas prices can fluctuate depending on where and when the gas is being purchased and to which delivery point it is being delivered.”
Through the BLP’s natural gas management services agreement with Trane — formerly Fellon McCord — Carpenter said four suppliers were asked to submit proposals for roughly 1.9 million decatherms of gas to be purchased for the upcoming year.
The four suppliers that responded are CNEG, EDF Energy, CenterPoint Energy and BP.
Officials said the proposed prices, which were discussed during a closed session and were not made available due to confidential agreements with each supplier, were within a couple percent of each other. It was determined that BP was the best positioned to provide the Marquette utility with reliable delivery of the fuel through the most critical times of the year — specifically winter.
“The suppliers were evaluated both on price and operational capabilities. It was recommended to the board that we choose BP to be our supplier at this time. They voted in favor of this,” Carpenter said in an email.
Carpenter said BP is the best suited operationally because of their large position on the gas transmission lines in the Upper Peninsula region due to the fact that they manage the gas for other large entities in the area. He also said BP provides 24/7 customer service, a customer portal and multiple avenues to their customer service team should the BLP need assistance at any time.
Since the price of natural gas fluctuates daily, choosing a supplier and entering into a basis pricing agreement will allow the BLP to secure its gas requirements at an indexed price and mitigate the commodity price risk associated with purchasing gas on a day-ahead basis.
The next step for the BLP will be to develop “an operational plan” that will include daily and monthly gas purchases, Carpenter said.
“We will do this by hedging portions of our gas purchases into the future so that we can lock up a firm price and not be subject to fluctuations in the price of gas on the spot market,” he said.
The BLP board will meet again at 2200 Wright St., Marquette for its regular meeting at 4:30 p.m. Sept. 11.
The board is expected to consider adopting its 2019 fiscal year budget.