Copyright © 2022 Albuquerque Journal
The New Mexico Gas Co. wants to reinforce system reliability and help mitigate sharp price fluctuations in cold winter months with a new, $180 million liquid natural gas storage facility it hopes to build in Rio Rancho.
The company filed for project approval Friday morning at the state Public Regulation Commission, which must issue a certificate of public convenience and necessity authorizing construction before the utility can move forward, said N.M. Gas Vice President for External Affairs Gerald Weseen. The PRC review could take up to 15 months, meaning the company couldn’t break ground until likely early 2025, assuming the commission approves the project.
“This could provide us with increased reliability and help us to mitigate the potential risks of price volatility,” Weseen told the Journal. “We faced extreme price swings last year during a severe winter storm in February 2021, and we spent more on gas in that one weeklong event than we normally do in an entire year.”
In fact, utility customers are still paying for that Arctic chill, which cost $110 million in fuel purchases that the PRC authorized the company to recover from ratepayers over a 30-month period that began in July 2021. That stretches full utility recovery out to December 2023, reducing the monthly impact on consumer bills.
As part of last year’s cost-recovery proceedings, the PRC asked New Mexico Gas to look at alternative storage options to give the utility more control over its gas supplies.
Currently, the company stores its natural gas in underground caverns in West Texas operated by a third party, creating reliability problems during severe weather events, plus additional costs, said utility Vice President of Gas Management and Technical Services Tom Bullard.
“We pay the facility owner there to store our gas, and we pay a little each time we take gas out or put gas in,” Bullard told the Journal. “Then, we pay to transport the gas by pipeline from there to our load center in New Mexico.”
More concerning, to get gas from storage, the facility operator requires a minimum four-hour advance warning, and, normally, 24-hour prior notice.
During last year’s Arctic chill, the stored gas wasn’t even available to the utility because of problems caused by the storm, Bullard said.
“By having our own storage facility right here, we would eliminate extra third-party costs, and we’d have direct access to the stored gas, allowing us to get it onto our distribution system within an hour after deciding we need it,” Bullard said.
In addition, with a utility-owned facility, the company can buy gas and store it in summer when prices are lower, and then make it available in winter months when prices are typically higher, Weseen said. That could smooth out sudden price spikes on particularly cold days, and especially during severe storms.
“If there’s another winter weather event, we could maybe avoid those extraordinary costs we saw last year, mitigating extreme price volatility,” Weseen said.
If built, the facility would include a liquefaction train to turn dry gas into liquid natural gas, permitting much greater storage capacity of up to 1 billion cubic feet, since LNG takes up only one-six hundredth of the volume of fuel in its gaseous state. A vaporizer would be used to turn it back into dry gas as needed.
The facility would occupy about 25 acres on a 160-acre property north of Double Eagle II Airport that N.M. Gas now has an option to buy.
Cost recovery for the project would be part of a future rate case after the facility becomes operational in late 2026.
“There would be no immediate impact on customer rates,” Weseen said.