A large mill sought to build in the Southeastern US. They engaged Legend to help determine the best path forward for purchasing and transporting natural gas to the newly constructed mill. Given the unforeseen construction costs, minimizing additional expenditures were a major focus of the project.
Legend began by analyzing the available natural gas distribution rates offered by the local utility. The utility was originally a small municipal utility system but was recently acquired by a larger utility company. As is often the case with smaller utilities, there were limited options for a large, industrial gas user like this and the available tariff rates were expensive.
To help the milling company lower its natural gas distribution costs, Legend approached the utility with the proposition of negotiating a special rate, but was told that the local utility “did not negotiate gas distribution rates.”
Given the utility’s unwillingness to negotiate, Legend began the process of scoping a project to tap directly into an interstate natural gas pipeline located within 10 miles of the mill and constructing a pipeline lateral that would be owned and operated by the customer, thereby completely bypassing the local utility. After receiving bids from contractors and securing the Right of Way, Legend again approached the utility with a “shovel ready” bypass project with a 7-year payback period. After reviewing the project details, the utility agreed to negotiate reducing their tariff by 80%.
Legend then worked to source natural gas supply through a competitive bidding process, helping the customer secure long-term, fixed-price natural gas supply to provide budget certainty during the first years of operation.
This milling company continues to receive Legend’s Natural Gas Management services, with the Legend team monitoring and reporting on natural gas activity daily, providing natural gas price risk management and purchasing advice, developing annual budgets, and strategically managing utility imbalances to optimize costs.
The negotiated natural gas distribution rate lowered the mill’s monthly natural gas distribution costs by 80% and has saved the customer over $2,000,000 over the first 4 years.
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