BROOKLYN UNION<BU> SEEN HURT BY PIPELINE CLOSURE Brooklyn Union Gas Co, a New York gas utility, will see its gas costs up sharply as a result of Transco Energy Co's <E> decision to close its pipelines to transport spot gas sales, energy industry analysts said. Brooklyn Union, the fourth largest gas utility in the United States, purchased 36 pct of its supplies on the spot, or non-contract, market in 1986, and the proportion of spot supplies was estimated much higher in the five months of 1987, analysts said. Texas Eastern pipelines <TET>, the other competing pipeline, to deliver spot gas from producing areas in the South closed its gate station for summer, and Brooklyn Union has relied entirely on Transco for spot supplies. In the month of May, Brooklyn Union paid about two dlrs per mln British Thermal Unit for spot gas, while contract gas costs four to five dlrs per mln BTU, industry sources said. Transco announced yesterday it would no longer provide open access to transport spot natural gas to its customers for fear of accumulating more take-or-pay liabilities. Take-or-pay contracts oblige pipelines to pay producers for gas even if delivery is not taken by its customers. Brooklyn Union will continue receiving a small amount of supplies from minor fields under a grandfather clause, a Brooklyn Union official said. Foster Corwith, gas analyst with Dean Witter Reynolds, said most of the rising cost to Booklyn Union will be passed through to rate payers. While net effect on the company will not be known for several months because of the time lag in deferred earnings, end-users, especially residential and commercial customers, will end up paying more for gas, he said. Because the closure takes place in summer months when gas demand is at seasonal low, the impact on cash flow would be small, Curt Launer, natural gas analyst with Donaldson Lufkin Jenrette, said. If the situation persists into winter heating season, high cost gas could cut in the company's profits, he said. Gas utilities along eastern seaboard relying on Transco for spot gas, such as North Carolina Natural Gas Co <NCNG>, Piedmont Natural Gas Co <PNY>, will face the same high cost factor as Brooklyn Union, Steve Richards, a supply manager with end users supply system, a Houston based natural gas brokering firm, said. "But these companies are not unwitting victims of the take-or-pay dispute between Transco and producers," he said. Distributors have turned a deaf ear to Transco's request for an inventory charge, which reserves the pipeline facility for spot gas to be delivered to these companies, he said. Without spot supplies, the high cost of system gas will threaten to drive away large customers capable of shifting to alternative fuels, he said. In absence of any guidelines on inventory charges from the Federal Energy Regulatory Commission, the matter is being negotiated between pipelines and customers, Richards said. Now that Transco has refused to transport cheap spot gas for them, these distributors are likely to be more conciliatory on the inventory charge, he said. "Cool heads will prevail," DLJ's Launer said, " but it may take a while."