Facing

Factoring in the serious financial woes that continue to face its troubled NRG Energy subsidiary, Xcel Energy last week reported that preliminary earnings for 2002 tumbled deep into the red with a sobering net loss of $2 billion, or $5.26 per share, compared with net earnings of $791 million, or $2.30 per share, in 2001.

Arthur L. Smith, CEO of the venerable energy research firm John S. Herold Inc., offered a prayer for the new year to oil and gas executives meeting in Houston this week: “Lord,” he pleaded, “let 2003 be boring.”

In a strikingly similar case facing Pennsylvania regulators, the Texas Public Utility Commission (PUCT) staff wants customer complaints in Texas to be resolved before bankrupt NewPower Co.’s certification as a Retail Electricity Provider (REP) is pulled. Before NewPower declared bankruptcy this spring, the PUCT had received more than 300 customer complaints about the company’s service.

As if the investigations facing them and other western suppliers at the Federal Energy Regulatory Commission weren’t enough, energy giants El Paso Corp. and Duke Energy confirmed Friday that they have received informal inquiries from the Securities and Exchange Commission (SEC) about their round-trip, or “wash,” trading activities.

Faced with a sharp drop-off in company stock and severe credit crunch, Williams Cos. is considering bring in an outside partner for its marketing and trading arm, a company official said last Wednesday.

To energy analyst Marshall Adkins of Raymond James, it is becoming clear that the United States is facing a “major natural gas supply problem that is likely to lead to higher gas prices over the summer and a potential gas price explosion next winter.” Adkins, who last month had predicted a bullish first quarter sequential decline of 2% and year-over-year decline of 3%, said last week that not only is U.S. gas production falling faster than analysts first thought, but “the supply deterioration has been shocking even to us.”

Facing the prospect of a fiscal crisis flowing from its electricity woes, a majority of the five-member California Public Utilities Commission last week rejected the governor’s proposal for a rate agreement with the state power-buying agency, the Department of Water Resources (DWR). The rate agreement had been billed as being essential to a future state bond sale backed by retail utility rates. The vote was 4-1, leaving a major question mark of how the state will pay for its power-buying spree.

Even with the lowest per-capita energy use among the 50 U.S. states, California is facing annual electricity growth that totals 20% over this first decade of the 21st Century, according to the draft “California Energy Outlook: Electricity and Natural Gas Trends Report” by the state energy commission. It is scheduled to be finalized by the five-member commission Sept. 5, along with a separate natural gas infrastructure report.

Given the lack of widely agreed-to solutions and an increase in disagreements among parties, anticipation will be high and expectations low this week in California’s complicated political and regulatory energy landscape that promises to heat up with the return of the state legislature and a crucial business meeting of the state regulatory commission.