Brief

Looking to get to the bottom of current and forecasted high natural gas prices, the Pennsylvania Public Utility Commission (PUC) presided over a special public hearing Thursday where it received testimony from utilities, consumers groups and government officials. The groups testified on current and projected natural gas prices, the forecasted supply and demand, programs to help consumers, and ways to increase consumer awareness related to gas prices for this winter. “This special hearing is an important first step for addressing potentially high natural gas prices,” said PUC Commissioner Kim Pizzingrilli, who organized the hearing. Under the informal en banc hearing process, the commissioners posed questions to the speakers after their testimony. The speakers explained how higher natural gas prices during the upcoming heating season are going to affect their agencies, homes, businesses and funding abilities for 2003-04. “We look forward to working with each of the panel members in the days and months ahead as we learn more about what prices will be for the winter and what programs are available to Pennsylvania consumers,” said PUC Chairman Terrance J. Fitzpatrick.

Atmos Energy Corp. has filed with the 66 cities it serves in West Texas to increase its natural gas utility rates. Atmos, which formerly operated in West Texas as Energas Co., last filed for a rate increase in 1999. As a part of its filing, Atmos proposed a Weather Normalization Adjustment Rider to reduce variability in gas bills during the heating season and to help to stabilize customers’ rates and Atmos revenues. If approved by the Public Utility Commission of Texas, the average monthly bill for all customer classes would increase about 7.32%, or about $3.29 a month. Atmos serves approximately 151,255 natural gas utility customers in West Texas.

U.S. District Judge Nancy Atlas postponed the trial date of Michelle Valencia, a former Dynegy Inc. energy trader, to Sept. 29 until prosecutors decide whether to appeal the judge’s decision to dismiss three charges related to making false reports to an industry publication. Valencia’s wire fraud charges related to the bogus reporting were not dismissed. Atlas earlier this month postponed the trial date of Todd Geiger, an ex-El Paso Corp. trader, to Sept. 29 also. He too is accused of wire fraud in making false reports to an industry publication (see Daily GPI, Sept. 4). Atlas in August dismissed the false reporting charges against Valencia and Geiger, ruling they were too broad and unconstitutional. Atlas said the Commodities Exchange Act, upon which prosecutors made the charges, lacked a requirement that the person charged have shown intent, and not just made false statements, which are protected as free speech. Prosecutors have until the end of September to decide whether to appeal the rulings. Valencia and Geiger, who have pleaded not guilty, remain free on bond.

Breaking the string of triple-digit weekly storage refills at four, the Energy Information Administration (EIA) Thursday morning announced a 97 Bcf injection for the week ending June 27. Natural gas futures prices, which were already in the process of a cautious short-covering rally, used the smaller-than-expected refill as a springboard to higher levels. But after a quick spike to an intra-day high at $5.36, the August contract was hit with a steady barrage of selling late Thursday morning and early afternoon. August closed mixed at $5.226, 2.7 cents higher in Thursday’s holiday-abbreviated trading session.

Williams said it has recently closed two transactions involving the sale of certain assets in the company’s exploration and production and midstream businesses. Over the past week, the company said it has closed the previously announced sale of natural gas exploration and production properties in the Denver-Julesberg basin in northeastern Colorado for $28 million to Petroleum Development Corp. It has also closed the new sale involving Williams’ 45% ownership interest in the 223-mile Rio Grande Pipeline that transports natural gas liquids from Hobbs, NM to Ciudad Juarez, Chihuahua. Navajo Southern Inc., a wholly-owned subsidiary of Holly Corp., purchased Williams’ interest for $27.5 million, subject to certain closing adjustments. Including the two most recent sales, Williams has received nearly $2.75 billion cash from asset sales that have been closed this year.

Standard & Poor’s Ratings Services (S&P) said Friday that it lowered its long-term corporate credit rating on Oneok Inc. to ‘A-‘ from ‘A’, and its short-term corporate credit and commercial paper ratings on the company to ‘A-2’ from ‘A-1’. Despite the downgrade, S&P noted that the outlook is stable. “The rating change reflects both the increase in leverage since the ‘A’ rating was assigned and the increasing scale of the higher-risk marketing and trading group, which now accounts for nearly 50% of operating income,” said Standard & Poor’s credit analyst Judith Waite. “Consequently, the business position has been lowered to ‘6’ (weak average) from ‘5’.” Business profiles are categorized from ‘1’ (strong) to ’10’ (weak). S&P added that over the past four years, Oneok has acquired a substantial portfolio of assets and built up a formidable presence in the mid-continent market for gas transportation, distribution, processing, gathering, and storage. While funding many of the acquisitions with equity and the proceeds of asset sales, the company also used debt, which weakened the financial profile, S&P said.

Cheniere Energy, which is planning three liquefied natural gas import terminals along the Gulf Coast, said it awarded the front end engineering design contracts for the Sabine Pass, LA, and Corpus Christi, TX, terminals to Black & Veatch Pritchard Inc. (B&V). The design work is expected to be completed for both sites by the end of September. B&V also worked for Cheniere on its first LNG site in Freeport, TX. An application for the Freeport terminal was filed with FERC last month (see Daily GPI, April 1). Cheniere said it plans to file FERC applications for the remaining two projects by next January. The two sites that Cheniere has chosen appear to be “exceptional locations for both access and permitting,” said Dwayne R. Stone, president of Black & Veatch. Cheniere CEO Charif Souki added that the sites were selected because they have “deepwater access, closeness to open water, safety, sufficient land, local demand for gas and pipeline access. Furthermore, the local communities at all three sites have been very welcoming and supportive. By the end of 2007, we hope to have facilities in place, which will allow suppliers the ability to bring 5 to 6 Bcf/d of gas into the country through these strategically selected Gulf Coast locations. It will give these importers flexibility and minimize the probability of delays to their ships because of weather, traffic, or unexpected channel closures, through the availability of multiple port locations, a multitude of docks, plentiful storage and pipeline access.”

Dynegy Inc. has closed the sale of its U.S. communications business, including a high-capacity broadband network spanning more than 16,000 miles with access points in 44 U.S. cities, to an affiliate of 360networks Corp. Financial terms of the deal, first announced in late March, were not disclosed. CEO Bruce A. Williamson said the sale finalizes Dynegy’s exit from communications. “The Dynegy you see now — and into the future — is one built around its core energy businesses, which include power generation, natural gas liquids and regulated energy delivery.”

The board of directors of ConocoPhillips said Thursday that it has implemented a number of changes in the management of its Exploration & Production segment. Following a brief transition period, changes in the segment will include: