WEC Energy Group’s storage plans mean more money for customers
The parent company of two major utility companies in Wisconsin, WEC Energy Group, Inc., has entered into an agreement to acquire Bluewater Natural Gas Holding, LLC, which owns a natural gas storage field near Detroit, for a total acquisition cost of $230 million.
WEC’s We Energies and Wisconsin Public Service currently lease—directly or indirectly—more than three-quarters of the Bluewater facility’s total working natural gas capacity under shorter-term (one- to five-year) interstate storage service agreements.
By entering into an agreement to acquire long-term access to the Bluewater storage facility, the company gains a unique opportunity for its Wisconsin gas utilities and its customers. That’s because the demand for and cost of natural gas storage and transportation services are expected to rise in the future with the increased use of natural gas for electric generation, Kevin Fletcher, president of We Energies and Wisconsin Public Service, told American Gas. As a result of this transaction, the gas utilities will no longer be renting or “leasing” 100 percent of their future gas storage needs.
After WEC closes on the acquisition of Bluewater Natural Gas Holding, LLC, the Wisconsin gas utilities will enter into long-term (60-year) storage agreements that will convert their short-term leased storage capacity at the Bluewater facility to long-term access on terms and conditions virtually identical to ownership.
“This proposal is a unique opportunity to purchase an asset that is already serving our customers, while saving significant money in the process,” Fletcher said.
Customers would start experiencing savings in about four years. Annual savings are projected to be around $20 million annually by the 15th year and increase in subsequent years.
While the company said its customers have recently benefited from low natural gas prices and low natural gas storage prices, these conditions are beginning to change. The value of natural gas storage is starting to rise with the increased reliance on natural gas as fuel for electric generation, and the cost of natural gas storage is on the rise with increased capital investment requirements, Fletcher said.
WEC and the Wisconsin natural gas utilities have the opportunity to lock in a significant portion of storage and associated transmission requirements at a significant savings for customers, he added.