Heating

With the convergence of regulatory, political and financial solutions for California’s investor-owned utilities heating up Monday in the state legislature and regulatory halls, questions about additional retail rate increases are being raised. Officials with Gov. Gray Davis are going out of their way to squash the notion that any more increases are imminent, on heels of 40% hikes earlier this year that just became effective in June.

With the weather heating up and power alerts being declared, Monday marked another day of heavy duty political rallies and advertising blitzes in California even though this is an off year for elections as Gov. Gray Davis and Southern California Edison Co. sought to inject a grass root’s element to their separate conservation and state legislative campaigns.

With higher home heating and electricity bills catching many homeowners off guard this winter, the Bush administration reported that it will make additional emergency funds available for public housing authorities (PHA) and resident management corporations.

With higher home heating and electricity bills catching manyhomeowners off guard this winter, the Bush administration reportedthat it will make additional emergency funds available for publichousing authorities (PHA) and resident management corporations.

Salomon Smith Barney (SSB) said its latest storage forecast hasthe winter heating season ending with 650-700 MMcf/d of gas instorage. The American Gas Association reported that there was 786Bcf of working gas left as of March 2 and storage levels were 375Bcf lower than one year earlier. Temperatures are projected to beabout 5% colder-than-normal this week and normal to slightly belownormal, on average, during the rest of March, SSB noted. “Thus,conservatively assuming 4-5 Bcf/d of lost demand due to fuelswitching and other factors and normal to 5% colder-than-normaltemperatures during the last three weeks of March, than storagelevels should exit winter at roughly 650-700 Bcf compared to 1,000Bcf last year.” SSB added that demand is starting to return to themarket as gas prices have dropped considerably. “[M]ost of theidled North American ammonia plants have now restarted given thesignificant increase in ammonia producer’s margin, or the spreadbetween ammonia prices and the implicit natural gas costs. SalomonSmith Barney said it believes its $5/Mcf composite spot priceforecast for 2001 “could prove to be conservative based on ourassumptions regarding production growth and U.S. economic growth.The bottom line is that, incorporating numerous other variables, ifdomestic production grows 3% this year and GDP growth is 1.25%,then storage levels are likely to approach or slightly exceed thenearly 2,800 Bcf levels attained at the beginning of November lastyear. If domestic production growth is much less than 3.0% thisyear, as several E&P companies are claiming will be the case(although interestingly not for themselves), then we would verylikely confront an even tighter supply/demand balance for naturalgas throughout this year compared with 2000.”

With prices still at record highs by Canadian standards,interest is heating up among producers in accelerating natural gasdevelopment in the East Coast offshore, including remote prospectson the Grand Banks of Newfoundland.

With prices still at record highs by Canadian standards,interest is heating up among producers in accelerating natural gasdevelopment in the East Coast offshore, including remote prospectson the Grand Banks of Newfoundland.

As the December bills for natural gas use hit the home front,city and state officials in Illinois, one of the hardest hit lastmonth, weatherwise, reacted with measures to increase low incomeassistance and investigate the cause of the high prices.

Some state officials already are dubbing the upcoming heatingseason as California’s “winter of discontent” as continued highwholesale natural gas prices are driving up consumer bills andstate regulators look at options for unbundling Southern CaliforniaGas Co.’s transmission and storage system.