California

Shell US Gas and Power announced it will no longer participate in a plan to build a $1.5 billion liquefied natural gas (LNG) terminal in Vallejo, CA citing problems with scheduling, expansion or cost. However, the Royal Dutch/Shell unit said it may consider building a terminal somewhere else in the state.

Joining the growing pile of abandoned plans for new power plants in California, the City of Roseville, about 30 miles east of Sacramento, last week terminated its agreement with part of Enron Corp. to develop a 750-900 MW power plant in Placer County. The action has officials in the counties in and around the state capital worried about new sources of power for the future.

While the western energy moguls slept, AMP took over for California’s electric transmission grid operator, CAISO, as an automatic screening agent to throw out any anomalous wholesale electricity bids into its real-time balancing market. It came one second past midnight Wednesday morning, ushering in FERC’s $250/MWh soft cap, but using the $91.87/MWh old cap as the heart of the three-step screening process. AMP stands for “automated mitigation procedure.”

Pacific Gas and Electric Company called a state two high inventory operational flow order with a 0% tolerance for Friday on its California Gas Transmission system. Penalties are $1/Dth. The company expects system inventories to extend well into the red zone above 4.5 Bcf through the weekend.

Unocal Corp. increased its offer, albeit slightly, on the pending share exchange offer for Pure Resources Inc. Subsidiary Union Oil Company of California made the amended offer Wednesday after a special committee of the Pure Resources’ board of directors obtained an injunction to stop the share exchange a day earlier (see Daily GPI, Oct. 2).

The October aftermarket opened on a heavily bullish note at eastern, southwestern and California points Monday with cash prices shooting up between about a quarter and a little more than 50 cents. However, Rockies numbers were flat to down as much as 20 cents, one source said. Lili officially became a hurricane — the fourth of the 2002 Atlantic season — Monday morning and was staying on a track similar to the one that Isidore followed before it caused widespread production outages in the Gulf of Mexico last week.

As an extension of its hotly debated proposed new market design, the California Independent System Operator (CAISO) last week circulated a working document on beefing up its authority next year. The ISO’s “conceptual proposal” will require input from stakeholders and will eventually include published market-sensitive information on a delayed basis. The CAISO will examine the proposal Sept. 19. Eventually some of the plan would have to be approved by the Federal Energy Regulatory Commission, according to a CAISO spokesperson.

Mirant shares fell from the high $3.70s early last week to the mid $3.20s Friday after CEO Marce Fuller warned on Tuesday that the company was about 20 cents/share behind where it expected to be at this time in the year. Fuller expressed concerns about Mirant’s ability to meet its earnings forecast of $1.60/share for the year. The current average of Wall Street analysts’ estimates is $1.54 with a low of $1.45 and a high of $1.69, according to Thomson Financial.

A year already marked by accounting problems and revelations of round-trip transactions preceded restatements of 2001 income last week by Reliant Energy Inc. and subsidiary Reliant Resources Inc. However, management warned that it is still reviewing other data on the phony deals, and ultimately plan to restate revenue, fuel and cost of natural gas and purchased power expenses for 1999, 2000 and 2001.