The financing arm of the municipal electric utility in Roseville, CA, received a negative outlook from Standard & Poor’s Ratings Services (S&P) on a $209.35 million tax-exempt bond to finance a 20-year, 46 Bcf natural gas pre-pay deal with Merrill Lynch & Co. because of recent financial disclosures by Merrill. S&P also gave an “AA-” rating to Roseville Natural Gas Financing Authority, the fuel financing unit of the muni in Roseville, a suburb east of Sacramento. S&P said the rating reflects a recent outlook revision for Merrill Lynch & Co. Inc., which provides guarantees to the financing authority’s gas supplier and interest rate swap counterparty. The outlook downgrade followed Merrill’s announcement that it expects to record a material loss in the third quarter caused by a more significant exposure to leveraged loan commitments, subprime mortgages, etc. S&P’s previous outlook assumed less exposure for Merrill. The Roseville gas financing arm is a state-chartered joint powers authority and a nonprofit public financing entity in California. The public financing arm used the proceeds from the $209.35 million to fund prepayment for a long-term gas supply deal from Merrill Lynch Commodities Inc. The gas is set for Roseville’s electric power generation system, priced at a first-of-the-month index from the Pacific Gas and Electric Co. citygate delivery point, minus a specific discount, according to S&P.

In preparing its customers for the winter heating season, Washington, DC-based Washington Gas said that assuming normal winter temperatures, customers can expect heating bills to vary slightly from last year — within a range of approximately 5% higher or lower — depending upon the amount of gas a customer uses, the type of service and the market price of gas. The utility, which serves more than one million customers throughout the city and the surrounding region, said the average cost of natural gas for a residential heating customer was approximately $1,000 last winter. “While we try to give customers a reasonable expectation at the beginning of the heating season to help them manage costs, it’s important to realize that changing weather, demand for fuel and other economic factors can have a significant impact on the actual cost of the gas supply during the winter,” noted Eric Grant, a Washington Gas spokesperson. Washington Gas said it takes a number of steps in managing its supply portfolio to help stabilize customer natural bills. “Each summer we purchase about one-third of our customers’ winter demand and store it for use when the weather is colder. The average price of natural gas during the summer historically has been lower than during the winter,” said Adrian Chapman, vice president of operations, regulatory affairs and energy acquisition at Washington Gas. “We have purchased another 18% of our customers’ winter demand using pricing methods that help reduce the effect of natural gas price fluctuations.” The utility added that regulatory initiatives approved in Maryland and Virginia also can help minimize monthly bill volatility, and a similar proposal is pending in the District of Columbia.

The U.S. Environmental Protection Agency (EPA) plans to develop regulations for geologic sequestration of carbon dioxide (CO2), a process of injecting captured CO2 emissions from a source, such as a coal-fired power plant, into deep rock formations for long-term storage, the agency said. Once completed, EPA said the regulations will ensure that there is a consistent permit system under the Safe Drinking Water Act for commercial-scale geologic sequestration programs to help reduce the effects of climate change. “Addressing global climate change will require fundamental changes in the way the world generates and uses energy,” said Stephen L. Johnson, EPA administrator. “By harnessing the power of geologic sequestration technology, we are entering a new age of clean energy — where we can be both good stewards of the Earth and good stewards of the American economy.” EPA is working with the Department of Energy as it carries out its carbon sequestration research and development program and is also coordinating efforts to evaluate potential impacts on health, safety and the environment. The Safe Drinking Water Act established the Underground Injection Control (UIC) program to allow the safe injection of fluids into the subsurface in a manner that does not endanger current or future underground sources of drinking water. EPA said it plans to propose regulatory changes to the UIC program in the summer of 2008 and will invite the public and stakeholders to provide input throughout the rule-development process. More information about geologic sequestration activities under the UIC program is available at

Missouri Gas Energy (MGE) will pay $2,000 to the Missouri public school fund and will implement new procedures under an agreement approved by the Public Service Commission (PSC) to resolve a July staff complaint alleging PSC rules violations in connection with a natural gas explosion and fire in Blue Springs, MO, in January. The explosion occurred in a vacant single family residence Jan. 8. The structure sustained minor damage; no injuries were reported. PSC staff stated in its report that it believed the explosion and fire occurred when a contractor working for MGE inadvertently introduced natural gas into an abandoned line. According to the PSC staff report, when natural gas went into the abandoned line, it migrated into the basement of the residence where it ignited. The staff report states that prior to the explosion, a contractor was working to replace gas lines at the intersection of 18th and Walnut streets. Under the agreement approved by the commission, MGE will implement additional training procedures regarding the location of abandoned lines for employees with line-location responsibilities, contractors, contractor inspectors and company first-responders. MGE will also implement a procedure requiring use of a gauge to ensure contractors and MGE personnel connect to the correct gas line. An MGE employee will also visit the site of critical pipeline procedures before or during these procedures.

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