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Money, environment factors in power plant debate


Ben Fenwick August 16th, 2007

In the debate over whether Oklahoma will build a $1.8 billion coal-fired power plant or use natural gas for fuel, both sides agree that:" coal is dirty, plentiful and cheap; and " natural gas is clean...

In the debate over whether Oklahoma will build a $1.8 billion coal-fired power plant or use natural gas for fuel, both sides agree that:
" coal is dirty, plentiful and cheap; and
" natural gas is cleaner and more expensive.

When Chesapeake Energy Corp. chief Aubrey McClendon made his appearance before the Oklahoma Corporation Commission about whether or not Oklahoma Gas & Electric should go forward with a new coal-fired power plant, he said they could buy natural gas from investment firms for a fixed price.

This, he said, would make gas more attractive for use as power-plant fuel.

"You can lock in today's price of natural gas," McClendon said. "Now, it may be that under today's rules the commission won't allow them to do that, but I think the commission could be convinced that it's the right thing to do as opposed to go out and build this power plant."

DIFFERENT STORY
However, OG&E spokesman Brian Alford said that McClendon told the commission one thing, but quite a different story to his investors. He pointed to Chesapeake's August 2007 Investor Presentation.

"Volatility is high and likely to increase. We love gas price volatility," Chesapeake's statement reads. "Why? "¦ Volatility creates opportunity to hedge unusually high prices that generate unusually high returns; helps unlock the option value embedded in long-life reserves."

Chesapeake spokesman Jim Gipson said that Chesapeake has a different relationship with investors than it does with the commission.

"In an investor relations context, we take advantage of the volatility. That's completely different from buying a fixed-price contract over a period of time," Gipson said. "Ben Fenwick

 
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