Fuel

Natural gas futures Friday had the trajectory of a hot-air balloon without enough fuel to remain off the ground. Prices rose initially but ended the day in negative territory as efforts by local and short-term traders to push the market higher failed. The April contract fell $0.038 to $7.290 and the May contract slipped $0.010 to $7.457.

Prices for merchant power assets appear to have halted a three-year free fall and more than 100,000 MW of electricity generating capacity — the amount bought and sold over the past three years — is expected to change hands in the coming 12 to 18 months, according to “Terra Firma: Merchant Power Plant Prices Hit Bottom,” a new research report by Cambridge Energy Research Associates (CERA), an IHS company.

Historic high fossil fuel commodity prices have prompted San Diego, CA-based Sempra Energy to consider selling or refinancing all of its Texas power generation assets, including two large coal-fired plants. With continued favorable market conditions, Sempra said it would complete the transactions next year. At stake are more than 2,000 MW and hundreds of millions of dollars.

In light of the potential effects of Hurricanes Katrina and Rita on fuel supplies and tightening supplies of natural gas in the Northeast generally, ISO New England (ISO-NE) “is becoming increasingly concerned about the operational reliability of the New England system during the upcoming winter,” the grid operator disclosed in a recent filing submitted to federal energy regulators [ER03-563-053].

Transition problems inherent is shifting Cheyenne Light, Fuel and Power utility operations from Xcel Energy to Black Hills Corp. have now been resolved, the Wyoming Public Service Commission indicated last Tuesday in accepting a report resulting from a three-month commission investigation. Problems developed after the sale was completed last January, but concerns about utility billing practices and other issues have now been put to rest, the PSC reported indicated.

The New York State Public Service Commission (PSC) is taking comments on a settlement in National Fuel Gas Distribution Corp.’s (NFG) pending rate case that will reduce natural gas customer bills over the next two years and fix rates thereafter. Although base rates actually will increase under the plan, a rate reduction will be achieved by passing through the benefits of a tax change and previous tax overcollections, the PSC said in a statement.

If the United States’ fuel mix included a “three-legged stool” of coal, natural gas and nuclear energy, with some reliance on wind, “it would really take the pressure off of natural gas prices,” Rep. Joe Barton (R-TX) said Tuesday.

A tightening squeeze by high fuel prices and a regional surplus of generating capacity is pushing Alberta toward adding electricity to its traditional product lines of natural gas and oil as Canada’s principal energy exporting jurisdiction.

Natural gas producers, consumers and regulators in North America and Europe will wrestle with new supply uncertainty, fuel alternatives, and volatile markets and prices for at least the next three years, according to Cambridge Energy Research Associates (CERA) researchers.