Columbia Gas System Inc. said yesterday that it has agreed to pay six natural gas suppliers nearly $100 million to release Columbia from obligations to take or pay for $650 million worth of natural gas.
The settlements release the company's wholesaling subsidiary, Columbia Gas Transmission Corp., from contracts common in the industry requiring the company to pay a certain amount for natural gas regardless of whether it takes any, said company spokesman Bruce Quayle.
The arrangement is subject to approval by the Federal Energy Regulatory Commission and could be modified if the commission rules the settlements are not in the public interest, said a FERC spokeswoman.
Quayle said that the cost of the settlement would not be passed on to consumers in higher rates. However, he said that prices consumers pay depend on factors beyond Columbia's control, such as utility rates. As a result, he said, it is impossible to predict whether costs to consumers might be reduced.
Ed Rothschild, assistant director for the Citizen/Labor Energy Coalition, a public interest group, said the arrangement could allow Columbia Gas to lower rates to consumers. "It appears that Columbia is trying to deal with financial problems. . . . Consumers may obtain lower rates from their efforts, but that is as yet unclear," he said.
The company, which reduced its obligation to all its suppliers by about 45 percent, had earlier estimated it would use $1.4 billion worth of gas under take-or-pay contract arrangements in 1983 and 1984, said Quayle.
"We will make pre-payments to producers of about $82 million and we will either take the gas or we will get the money back from the producers," Quayle said. He added that the company made a one-time payment to the producers of about $17 million in exchange for relief from some of the obligations.
The company, which is a principal gas supplier to Washington Gas Light Co. and Baltimore Gas & Electric Co., said it wanted out of the contracts because of an unusually warm winter.
"The situation arose primarily because the winter of 1982-83 was one of the warmest winters on record," said Quayle. "We came out of our heating season in early 1983 with almost no room in the storage fields for additional gas," he said. But 12 producers from whom the company buys gas "didn't necessarily agree with our position and decided to take the matter to court," he said.
Quayle would not release the names of the six suppliers with whom the company had settled, but listed the 12 suppliers who filed suits against Columbia as Exxon USA, Union Oil of California, Amoco Production Co., Mobil Oil Exploration and Producing Southeast Inc., Chevron USA, Union Texas Petroleum Corp., Wagner & Brown, Koch Industries Inc., Adobe Oil & Gas Corp., Superior Oil Co., Monsanto Oil Co. and Mesa Petroleum Co.
In a separate case, in December 1982, FERC Administrative Law Judge Michael Levant ruled the company had acted improperly by purchasing excessive quantities of high-priced gas and curtailing purchases of cheaper gas and ordered the company to issue customer refunds.
The full commission subsequently reversed that ruling but stated that Columbia "showed reckless disregard of its duty to provide service at the lowest reasonable rate." The Citizen-Labor Energy Coalition is appealing the decision.