Curb

It remains to be seen whether the effort of California state regulators and the incentives in the new energy law will be sufficient to curb the appeal of California’s consumer group-driven energy reregulation ballot measure in November. Unlike much of the rest of the nation, which will begin seeing cooler temperatures in another three weeks, the Southwest, including California, probably will be broiling and that won’t be good for an already stressed power grid, according to Stephen Conant, senior market analyst at Massachusetts-based Energy Security Analysis, Inc. (ESAI).

California’s Attorney General Bill Lockyer last week continued his long-running campaign against the competitive energy market, issuing a report warning that market abuse remains a threat and suggesting legal and regulatory remedies to prevent it.

Even as FERC’s threat to yank Reliant Energy’s authority to sell power at unregulated rates looms, the Houston-based energy company will likely be able to obtain another extension of its $2.9 billion debt payment due Friday, an energy analyst said. But Reliant’s ability to repay debt in the future could become severely constrained if the agency’s threat becomes reality.

Some environmental groups have decided to refrain from publicly criticizing President Bush’s energy policy in the wake of last week’s deadly terrorist attacks on the nation’s financial district in New York City, its capital in Washington, D.C., and an airliner that crashed in Pennsylvania.

While the power industry has tended to be fairly civil so far in its criticism of FERC’s plan to mitigate prices on real-time transactions in California during emergencies, lawmakers representing the state are letting the Commission have it with both barrels.

FERC “took a large step” forward last Wednesday by approving the much-anticipated market monitoring and mitigation plan for the out-of-control California energy market, but it didn’t go far enough, according to officials with Williams Companies, the New York Public Service Commission and Dynegy Corp. California lawmakers, however, were far more blunt in their assessments.

As if crashing oil prices, fresh weather forecasts and the release of storage data were not enough Wednesday, the natural gas futures market was rocked again Thursday by a report of a pipeline rupture in the Gulf of Mexico (see related story this issue). Although the accident has since been dubbed a non-event, it produced a dramatic, if brief, spike in prices as commercial traders loaded up on contracts only to dump them just minutes later.

To curb growing linepack, NOVA changed its daily imbalancetolerance range to +2%/-18% at noon Tuesday.

California regulators are expected to begin taking a much closerlook next week at proposals to curb market power in the state’s gasindustry, and their decisions could rapidly accelerate convergenceof the gas and electric industries. Included among the proposals isa plan to force the state’s major utilities to divest gastransmission and storage assets and form an independent gastransmission system operator, replicating part of what was done inthe state’s power industry. California natural gas industryrestructuring proceedings are scheduled to move into overdriveduring four day-long hearings starting April 6 in San Francisco.