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Feeding the gas burn: A closer look at Southern Co.'s pipeline deal

Pipeline flows and contract commitments make a compellingcase for why  plans tospend $1.47 billionand absorb about $600 million in debt to be a 50% owner in the  pipelinesystem.

SNL Image

SNL Energy pipeline data highlights Southern Co.'s growing gasdemand from its power plants and its newly branded utility segment and speaksvolumes about why the conglomerate paired up with Kinder MorganInc. on the pipeline deal.

The7,600-mile Southern Natural Gas pipeline feeds one of the fastest-growing gasdemand regions in the country, the Southeast. And much of that demand is comingfrom Southern Co. power plants and SouthernCompany Gas utilities.

"Our new ownership stake in SNG willposition Southern Company for future growth opportunities andenhanced access to natural gas, which are expected to benefit customers andinvestors alike," Chairman, President and CEO Thomas Fanning said when thedeal was announced July 10.

Overthe past five years, peak monthly utility demand on the system has risen byabout 10 MMDth in winter months, while peak monthly power plant demand is alsoon an upward trend.

Monthlyutility demand hit a high of more than 53.8 MMDth in January 2016, whilemonthly power plant demand peaked above 35.5 MMDth in June 2016.

AsSouthern Co. continues to transition from coal, the company has said, it willincreasingly burn more gas. Fanning in April 2015 said he could see Southernburning 2.3 Bcf/d of gas for power generation by 2020, saying the company wasexploring every opportunity to prepare. In that interview, he at his desire for a deallike the Kinder Morgan transaction.

"Gas continues to be really important in our future andso evaluating infrastructure opportunities that would capture the synergy ofour own consumption with infrastructure makes a lot of sense," he said atthe time. "We're looking at a lot of different opportunities."

SouthernCo.'s natural gas plants operating since at least 2011 are burning more of thefuel. For plants reporting gas burn in each year from 2011 through 2015,consumption is up from about 0.41 Tcf to over 0.57 Tcf. Southern Co.'sregulated utilities now own about 13,900 MW of gas-fired generation capacity,according to SNL Energy data.

The0.57 Tcf represents nearly 6% of the gas burned in the country for powergeneration. The U.S. consumed 27.48 Tcfof natural gas for all of 2015, 9.67 Tcf of which was used for electric power,according to U.S. Energy Information Administration figures.

Lookingforward, Southern Co. plans to get a lot of its natural gas from the SouthernNatural Gas system. After its purchase of AGL Resources, which now operates asSouthern Company Gas, Southern Co. is now contracted for about half of the firmmaximum daily transportation commitments on the Southern Natural Gas pipelinesystem and about two-fifths of the storage reservations, according to an SNLEnergy index of customer data.

To view operationalstatistics on interstate natural gas pipelines, go to our PipelineSummary Page. To view natural gas operational flow data for receipt ordelivery points, go to our OperationalCapacity by Point Page.