Abstract
The new structure of the electrical power industry has dramatically changed the opportunities available to independent power producers. Gone are the days when the developer and the utility argued, sometimes for years, at a utility commission trying to establish the rates for energy and capacity from a project. Open access legislation and advances in metering technology and information systems have revolutionized the production, sale, transportation, and purchase of electricity. A commodity market has developed, in which the prices are set by supply and demand, and a producer's profit is determined by the true cost of production. Because fuel is the single largest component of delivered power cost, innovative suppliers will be exploring ways to use energy that is priced below the traditional, commercially available sources. Gas that is stranded, unable to be sold through conventional means, has the potential to become a valuable component in the energy supply mix if a few basic principles are followed. Critical relationships between gas price, generation cost, and power market price are described, as well as relationships between key stakeholders: gas producer, independent power producer, interconnected power utility, and power marketer. Drawing on experience gained in field operation of a stranded gas program, the talk addresses financing mechanisms, contractual mechanisms, and design and operation choices for generation equipment to facilitate transactions.
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