Cash prices kept rising Wednesday but at a considerably slowerrate than on Monday and Tuesday. Most of the new increases werearound a nickel or less, and the Northern California points ofMalin and the PG&E citygate actually fell slightly afterPG&E elected not to extend a low-linepack OFO. Sourcesindicated some retreat is likely today, saying the cash market hadmilked just about all the upside possible out of recent forecastsfor colder weather. In addition, the screen’s decline of nearly adime Wednesday should be a negative influence, they said.

El Paso confirmed that someone had upped the ante on the negotiateddeal for slightly more than 1.2 Bcf/d in firm capacity to theCalifornia border that was announced Friday (see Daily GPI, Dec. 13). A higher bid was submitted priorto Wednesday’s 1 p.m. MST deadline in a four-day open season, apipeline spokesman said. However, the original negotiating party hasuntil this afternoon to match the new price and retain the capacity.

The new bid was for $38 million over one year starting Jan. 1,about $8 million more than the amount in Friday’s announcement ($30million). One source called it “ridiculous” that someone waswilling to pay so much for the space, given that on amark-to-market basis the capacity is worth only about $20-25million.

Late last week some sources speculated that Duke Energy was therecipient of next year’s package given its large power generationholdings in California. A marketer yesterday said he believedDynegy upped the ante. “Rather than go through all the hassles they[Dynegy] had at FERC with the 1998-99 package, they let someoneelse do all the work this time and then came in late with a higherbid. That way no one can complain that the procedure was tainted.After all, Dynegy has quite a few power plants in California tokeep fueled, and all of their current FT on El Paso expires at theend of this year. Of course, they still could be thwarted if theoriginal negotiated customer matches their bid. It may all soundkind of Machiavellian but sort of makes sense.” Other sourcesheavily discounted the chances of Dynegy being the new high bidder,pointing out that the company made significantly less than expectedthis year because San Juan/border basis differentials narrowedsignificantly. A Dynegy source indicated that the company wasinvolved in the bidding and lost to Duke in the first round.

Regardless of what happens next year, a marketer noted that theSouthern California border/San Juan basis spread continues tocompress as SoCal Gas withdraws from storage and east-of-Californiautilities exercise their peaking contracts because of cold weatherin the Rockies and elsewhere in the West. From a December indexspread of 29 cents, the border/basin gap was down to about 18 centsWednesday, she said.

The work on the Grand Chenier (LA) Compressor Station, which hasbeen extended (see TransportationNotes), is making ANR’s Southeast Mainline very short in the daymarket, a Gulf Coast marketer said. ANR was trading at a discount toTennessee’s 800 Leg all month, she said, but has suddenly leapfroggedto a small premium.

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