Preceding

The controversial Northeast-bound Independence Pipeline andMillennium Pipeline have won draft environmental acceptance at theFederal Energy Regulatory Commission, giving both the first bit ofencouraging news since the project applications were first filed.But the projects may not turn out as originally designed.

Most of the cash market leveled off Wednesday, with few pointsstraying more than a penny or two to either side of flatness. TheRockies, where weather is currently chilliest, recorded most of thegains of 3 or more cents. Although the screen eventually achieved again of more than 3 cents, cash had only moderate softness infutures as a morning influence.

Giving interstate pipelines the authority to negotiate terms andconditions of service would pose “significant dangers tocompetitive markets,” Dynegy Inc. says. But it does favor givingsuch authority to pipeline customers – the buyers of recourseservices – to allow them to sell or trade components of theirrecourse services to and among themselves. In short, theHouston-based marketer envisions creating a secondary market forrecourse service components that would compete head-to-head withthe primary market.

Faced with conflicting reports about the need for new pipelinecapacity to serve the Northeast quadrant of the country, theFederal Energy Regulatory Commission last week called for aninquiry into the area’s projected demand for natural gas over thenext 20 years.

The renewable-fuel mandate in the Clinton administration’sretail electricity restructuring legislation that was unveiled lastweek may be seen by the natural gas industry as its worst nightmarecome true, but it does have a little bit of a silver lining.Although it sets aside 7.5% of gross annual generation output forrenewable fuel sources, which is at least triple the current level,the full effect of the mandate won’t be felt until the end of thenext decade at the earliest.

With possible national implications, California has proposed astate law that would impose “public goods” surcharges on all gassold for consumption within the state, including gas delivered byseveral proposed federally-regulated interstate pipelines that seekto bypass local distributors and directly serve large industrialcustomers. The fees would support energy efficiency,weatherization, public interest energy research and development,and low-income programs. The proposed change undergoes its firstpublic scrutiny in a legislative committee hearing in Sacramento onApril 19. If passed it is sure to splinter the gas industry betweenintra-and interstate interests.

The D.C. Circuit Court of Appeals has remanded FERC’s rejectionof a 1997 complaint in which Southern California Edison accusedSouthern California Gas (SoCalGas) of gaming the secondary marketfor firm capacity on key transportation links between the low-costSan Juan producing basin and the California border.

Texas Independent Energy, a 50-50 joint venture of PSEG Global of New Jersey and Panda Energy International of Dallas, plans to design, build and operate a third merchant power plant in Texas. This one, to be in Ector County, represents a total investment of about $300 million. The Ector County plant will burn an average of 145 MMcf/d with a peak gas consumption of 170 MMcf/d. Commercial operation is expected by summer 2001.

The Clinton administration’s retail electricity restructuringbill that was unveiled yesterday had some bad and not-so-bad newsfor natural gas. The bad news was that it requires a maximum 7.5%of annual electricity output to be generated by renewable fuelsources, but on the brighter side the full effect won’t be feltuntil the end of the next decade at the earliest.