Normal

Even with more federal regulatory intervention and a return to closer-to-normal hydroelectric supplies in the future, California is facing at least two more years of electricity supply-demand imbalance and the prospect for higher wholesale power prices as a result, according to Andre Meade, utility analyst at Commerzbank Securities.

Normal temperatures have returned to North America, but naturalgas usage, which powers nearly three quarters of the continent,remains high, said El Paso Corp.’s John Somerhalder II, who made itclear that the market will continue to grow at a rapid rate — buthe muddied his forecast by questioning where the gas would befound, calling the “challenges more severe than we anticipated.”

A revised National Weather Service forecast, expanding theprediction of below normal temperatures for the Christmas weekendto the entire United States except for the sparsely populated UpperPlains, kept most prices from softening Friday, as some hadanticipated. Except for the still-most-expensive West Coast market,all other points realized gains from about a dime (San Juan Basin)to a little more than 50 cents (Northern Natural Gas market area).

As cooler-than-normal temperatures statewide reduced peak-powerdemand to winter levels, California last week was awash in proposedsolutions to its electricity price and supply problems, which arelikely to be much more severe next summer.

All cash points retreated Wednesday within a range of about anickel to 20 cents, with most declines occupying the middle groundat 8-15 cents. Sources attributed the softening to the screen’sweakness a day earlier, a general dearth of cooling load, anddoubts about production risks from downgraded Tropical Storm Debby.

Despite continued above-normal temperatures across much of theU.S., natural gas futures rumbled higher yesterday as local tradersbid up prices in an attempt to set off buy stops positioned abovethe market. However, by Monday afternoon it was apparent they wereonly partially successful, and after notching a $2.255 high theFebruary contract eased lower to close at $2.216, a 4.3-centadvance for the session. Estimated volume was low with 48,189contracts changing hands.

Reliant told shippers Wednesday that an Operational Alert has been lifted, so imbalance tolerances are back to normal (see Daily GPI, Dec. 21). Reliant also said it now expects an outage of the electric unit at Buckley Compressor Station north of Shreveport, LA (see Daily GPI, Dec. 14) to last through the end of February 2000.

One day after concluding its purchase of Sonat Inc., El PasoEnergy Corp. completed its after-merger corporate restructuring.Through normal attrition, early retirement and 607 layoffs, thework force has been pared down from 5,500 to 4,575, the companysaid Tuesday. The action is part of a company-wide plan toimplement the optimal corporate organization for the future, ElPaso said, and the company expects to save in excess of $100million in the first full year after the merger due to thesemeasures.

Swing prices continued their downhill slide Friday, succumbingto the normal drop in weekend demand, a softer screen and lack offresh storm news. Except for Midwest citygates, where a warmingtrend was developing, virtually all eastern points fell by a dimeor more. Waha and the Permian Basin also experienced dime-plusdeclines, but other western points tended to fall only a nickel orso. Sources attributed the West’s relative firmness to heavy airconditioning and agricultural load in California and other states.