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The power price spike to $7,000 MWh this past June in theMidwest was not out of line with the cost of running little-usedpeaking generators, according to a leading marketer, and from aregulatory viewpoint the key lesson was that residential customersdid not have to pay those prices.

Southern California Gas will hold a one-day auction Sept. 1 tosell its exclusive rights to buy 370 miles of large-diametertransmission pipeline and related facilities currently transporting1.1 Bcf/d of supplies from Rocky Mountain and Southwest supplysources. The winning bid(s) will be announced Sept. 16, SoCalGasofficials said this week. A previously announced June8-through-mid-July auction was canceled because of state regulatorydelays, they said. Both the auction and results will be accessiblethrough the large gas-only distribution utility’s on-line GasSelectservice and company website on the Internet(www.socalgas.com/3rdparty/kern).

FERC ventured into unknown territory yesterday to help Georgia’slargest gas utility implement retail unbundling behind its citygateon Nov. 1 but avoid costs stranded by retail competition. In afour-to-one vote, the Commission granted Atlanta Gas Light alimited one-year waiver of certain federal regulations, allowing itto allocate, rather than release under the regulated competitivebidding procedure, 102,100 Dth/d of capacity on Southern NaturalGas to marketers taking over gas sales on its distribution system.

Temperatures that were 15.2% and 2.1% warmer than normal in thefirst and second quarters of the year, respectively, prompted theAmerican Gas Association to significantly scale back its gas demandforecast for the year. The association is projecting a 0.3% decline(0.1 quadrillion Btus -1 quad is roughly equivalent to 1 Tcf) ingas demand in 1998 to 22.6 quads in contrast to its Decemberforecast of 3.1% gas demand growth this year.

Dynegy CEO Chuck Watson attributed his company’s improved secondquarter performance to stronger margins in the wholesale gas andelectric businesses despite weaker margins in the company’s liquidsbusiness.

The Natural Gas Supply Association (NGSA) voiced its support forfuel- and generation-neutral nitrogen oxide requirements proposedby the Environmental Protection Agency (EPA).

Cinergy Corp. took a huge step in growing its commoditymarketing operation yesterday with the purchase of Producers EnergyMarketing, LLC, (ProEnergy) from owners Oryx Energy and ApacheCorp. for $42.5 million and with the signing of a 10-year marketingalliance that covers both producers’ entire marketable gas supply,or about 1.1 Bcf/d.

A last-minute protest by Scana Energy Marketing to a requestedwaiver by Atlanta Gas Light to allow assignment of some of itsupstream pipeline capacity as part of the Georgia unbundling planmay have been a factor in derailing FERC action last week.

Prices in nearly all markets outside the Rockies moved a littlehigher Tuesday, but late retreats at many points indicated theaftermarket upticks fueled by producing-area heat may be subsiding.