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S. Putnam board looking for cheaper natural gas

Thursday, September 21, 2006

It seems everyone is talking about gas prices these days.

On Monday, members of the South Putnam School Board considered changes to the way they buy natural gas for the corporation's facilities.

Dana Parker from ProLiance Energy, a national gas marketer based out of Indianapolis, presented the idea of the board utilizing ProLiance Energy as a third party supplier for natural gas. Currently the corporation buys gas from Vectren.

ProLiance Energy was started in 1996, and is a wholly owned subsidiary of Vectren and Citizen's Gas. They have significant resources in the market and on interstate pipeline system, according to the presentation to the board.

Greencastle Community Schools purchases gas from ProLiance and Cloverdale is considering it, Parker said.

Parker said that the board might be hesitant about leaving its utility, its "tried and true" way of getting gas, and it might be worried about receiving its gas supply. But Parker attempted to alleviate the concern by telling the board that ProLiance was the number one shipper of Texas and Panhandle gas, two major suppliers of natural gas.

She did not say how much money the corporation may save with the plan.

According to Parker, ProLiance works with more than 50 school corporations and these corporations are pooled together with ProLiance's commercial and industrial customers. This means that ProLiance has a larger pool of customers to balance out the supply.

Parker said that Vectren is offering a new program called Rate 225, which is available to all educational institutions beginning Nov. 1. There is an added facility charge of $7 per meter per month because the corporation is not on the program now.

But Parker said that the savings the corporation will receive for being a part of the transport program will override the additional fee.

In order to join the program, the corporation would have to provide Vectren with a 30-day notification letter and a pooling agreement with ProLiance.

If the board were to choose ProLiance as its third party supplier, then ProLiance would offer the corporation an analysis of its gas meters to ensure the best economical transport rate, daily gas market reports and free energy audits, price management buying programs allowing the corporation to run the schools, and no consulting or membership fees.

Parker also provided the board with information on the three ways to buy gas. The first is a floating contract where the price floats with the market month to month. The second is going with a fixed priced position where the corporation would receive information on the market and try to time the market itself. The third is the Signature Guardian strategies provided by ProLiance which allows Signature to look at the market for the corporation.

These strategies are the disciplined strategy, the performance strategy and the hybrid strategy. The disciplined strategy systematically converts all the corporation's closing prices to fixed prices one day at a time. With the performance strategy, Signature and ProLiance buys and sells the corporation's gas prices on its behalf. The hybrid is a mixture of both the disciplined and the performance strategies.

Parker said there was a management fee for using the Signature strategies. The fee for using the disciplined strategy is $25, while the fee for using the performance strategy is $36.

Parker recommends all schools used the disciplined strategy. Board member Nancy Wells asked about the cost of transporting gas. Parker said that the board would be essentially paying two bills. One bill is for ProLiance, while the other is for Vectren's distribution charge.

The board will be reviewing and analyzing the idea of utilizing ProLiance as a third party supplier, but it is undetermined when a decision will be made.



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