FMPA Helps Create Partnership to Buy Natural Gas Reserves
ORLANDO, Fla., Nov. 16, 2004 – Florida Municipal Power Agency (FMPA) signed an agreement yesterday with six other public gas and electric utilities in five different states to form a first-of-its-kind gas supply agency called Public Gas Partners, Inc.
Public Gas Partners (PGP) was created to secure economical, long-term wholesale natural gas supplies for its seven member agencies to stabilize and reduce the cost of natural gas. The innovative partnership among governmental entities was motivated by the common need for a long-term, secure stream of economical natural gas supplies.
At PGP’s first official governing board meeting Nov. 15 in Atlanta, the Board of Directors elected Roger Fontes of FMPA as Chairman of the Board, James H. Smith of Southeast Alabama Gas District as Vice Chairman, and Katrina Vaughan of Florida Gas Utility as Secretary/Treasurer. The Board also appointed Susan Reeves, Chief Financial Officer of the Municipal Gas Authority of Georgia, as President of PGP.
In recent years, natural gas prices have risen dramatically—doubling and even tripling in short periods of time. The price of natural gas in the United States, which historically moved in a fairly narrow range around a price of approximately $2 per MMBtu, has demonstrated significant volatility in recent years and currently is trading near $8 per MMBtu. The long-term prospects suggest continued price volatility.
By pooling the natural gas needs of its members, PGP will acquire producing reserves or other long-term gas supplies to create discounts and economies of scale for everyone in the group, and in turn, their customers. PGP members anticipate acquiring a portfolio of long-term supplies primarily made up of producing natural gas reserves. The group favors a portfolio approach to diversify assets and mitigate risk associated with long-term supplies.
PGP expects to target an initial supply portfolio capable of producing approximately 60,000 MMBtu per day or 219 Bcf over 10 years. FMPA projects that approximately 20% of its daily gas needs eventually will be supplied by the new partnership, yielding significant cost savings below current market prices.
“We are very excited about what this new gas supply venture can do for each of the members and, importantly, what it can do for all of our consumers,” said Roger Fontes, newly-elected Chairman of PGP. “At this time, we have put a small portion of our natural gas requirements into PGP, and as PGP builds the kind of high quality portfolio of gas reserves we expect over the next several years, FMPA and the other members will likely increase the amount of their long-term requirements met by PGP.”
“It is so great to see both gas and electric public agencies pool our resources together in joint-action to create the synergy and economies of scale that will yield win-win results for all involved,” said PGP Vice Chairman James H. Smith. Fontes added, “Expanding joint action from state-level operations to regional, super-joint-action operations promises significant cost savings and expanded opportunities for consumer-owned utilities.”
The day-to-day operations of PGP will be performed under contract by the Municipal Gas Authority of Georgia. All operation and management costs for PGP will be funded through fees to its membership. Each member has appointed a representative to the PGP Board of Directors.
The members of Public Gas Partners include Municipal Gas Authority of Georgia (MGAG), Florida Municipal Power Agency (FMPA), Florida Gas Utility (FGU), Lower Alabama Gas District (LA Gas), Patriots Energy Group (PEG), Southeast Alabama Gas District (SEAGD), and Tennessee Energy Acquisition Corporation (TEAC).
Florida Municipal Power Agency (FMPA) is a wholesale power company owned by 29 municipal electric utilities. FMPA provides economies of scale in power generation and related services to support community-owned electric utilities. The members of FMPA serve approximately 1.8 million Floridians. FMPA’s members include Alachua, Bartow, Bushnell, Chattahoochee, Clewiston, Fort Meade, Fort Pierce, Gainesville, Green Cove Springs, Havana, Homestead, Jacksonville Beach, Key West, Kissimmee, Lake Worth, Lakeland, Leesburg, Moore Haven, Mount Dora, New Smyrna Beach, Newberry, Ocala, Orlando, Quincy, St. Cloud, Starke, Vero Beach, Wauchula and Williston. Additional information is available on the Internet at www.fmpa.com.