Independent power producer Calpine Corp. acquired Dow Chemical’s70 MW gas-fired power plant at Dow’s Pittsburg, CA, chemicalfacility for about $13 million. The deal includes Dow’s gaspipeline system. Key to the transaction is Calpine’s plan to builda 500 to 700 MW gas-fired power plant adjacent to the chemicalplant. The new power plant will require capital of $250 million to$350 million. The existing plant uses 16,000 MMBtu/d, and the newplant will use 80,000 to 90,000 MMBtu/d.

The American Gas Association told FERC it supports a proposalsubmitted earlier this month by the New York Public ServiceCommission calling for a proposed rulemaking that would open up aninquiry into the appropriate rate design for interstate pipelines.AGA and NYPSC believe a change is needed from the current mandatethat all interstate pipeline rates conform to the straightfixed-variable methodology. In January, AGA released a paperdescribing the benefits of non-SFV rate design: it would makecapacity “more marketable and assignable because it allows partiesto pay for capacity as they use it.,” it would create an incentivefor the pipeline to use existing capacity before expanding andpipelines would be less inclined to overbuild, according to AGA.

The Chicago Board of Trade’s (CBOT) board of directors voted tolaunch two electricity contracts Sept. 11. The contracts are basedon physical delivery into the Commonwealth Edison (ComEd) andTennessee Valley Authority (TVA) systems. ComEd has connections tonine utilities in Illinois, Iowa, Indiana, and Wisconsin. TVAconnects to 18 states with 47.8% of the U.S. population. “TheseComEd and TVA Hub contracts will closely parallel commercialactivity in the wholesale power cash markets,” said CBOT ChairmanPatrick H. Arbor. “By offering this energy complex to our membersand customers, the CBOT is providing the increasingly importantelement of risk management to the power industry.” The CommodityFutures Trading Commission approved the ComEd contract May 8 andthe TVA contract June 8.

The U.S. Department of the Interior’s Minerals ManagementService (MMS) awarded deep-water royalty relief to a third field inthe Gulf of Mexico last week. The relief, which allows royalty-freeproduction from deep federal waters in the Gulf, was applied toAmoco’s development of the Desoto Canyon Block 133 field offshoreLouisiana. Royalties will be suspended on the first 87.5 millionboe produced from the field, nicknamed King’s Peak. This fieldcontains dry natural gas and the relief provided could be as highas $143 million. The field is in 6,700 feet of water, about 120miles southeast of New Orleans. The Deep Water Royalty Relief Act,signed by President Clinton in November 1995, allows the MMS togrant royalty suspension volumes on both producing and nonproducingfields in water deeper than 200 meters to promote development,increase production, or encourage marginal production of Gulfleases west of 87 degrees, 30 minutes West longitude.

TransEnergy Management said two more Canadian companies – CXYEnergy Marketing, and Direct Energy Marketing, both based inCalgary – signed licensing agreements for its energy managementsoftware. “Energy marketers today need integrated, real-timesystems that provide one-time data entry for physical and financialtransactions,” said Gary M. Vasey, TransEnergy vice president ofmarketing. “With TransEnergy’s systems, our customers can integratetheir risk management and trading systems, saving time and reducingerrors.” Ken Krug, vice president of risk management and financialproducts for CXY, said the companies original database systemforced it to do triple entries, creating the potential for errors.Direct Energy Marketing said its existing system was becoming toocostly and difficult to maintain.

TECO Energy announced that its Peoples Gas Co. subsidiary hasacquired the assets of Florida Gas Services Corp., a southwestFlorida-based propane distributor. Florida Gas Services delivered700,000 gallons of propane to more than 2,300 customers primarilyon Marco Island near Naples and in the Fort Myers area in 1997.Peoples is Florida’s largest independent propane company deliveringmore than 30 million gallons annually to over 50,000 customersstatewide.

The Gas Research Institute released a concise study of thenatural gas market that examines the dynamics driving short-termprices. The study, “Short-Term Gas Prices: How the Market Adjuststo Changing Fundamentals,” discusses how short-term gas prices areaffected by the interaction of five key factors-weather, fuelcompetition, infrastructure, market dynamics and financial issues.Compiled by GRI and Energy and Environmental Analysis Inc.,Arlington, Va., the study includes 16 tables and graphs. Itidentifies a number of possible future developments that may affectshort-term pricing, including fuel procurement services and pricingto better meet the needs of the fast-paced hourly markets forelectricity, financial fund managers and other traders exploitingopportunities for profitable arbitrage across all energy markets,the increasing impact of environmental regulations, the apparentincrease in spring and fall storage injections, and the impact ofnew pipeline capacity. For a copy of the report call Val Megginsonat 703-526-7832.

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