Pressure

For the third week in a row, natural gas futures came underheavy selling pressure in the Sunday evening/Monday morningovernight Access trading session, initiating a gap lower open whenregular open-outcry trading resumed Monday at 9:30 a.m. (ET). As itturned out, that was about all the excitement the market couldhandle for one day because prices remained almost unchanged,slipping only 2.9 cents through the session as traders elected toremain mostly on the sidelines. Although the change throughout theday was small, the damage done overnight was significant, demotingthe March contract to $5.821, 38.9 cents beneath Friday’s close.

Reluctantly and in the face of extraordinary pressure fromfinancial, utility and public officials, California regulatorsThursday took initial steps to unfreeze retail electricity ratesfor the state’s two largest investor owned utilities (IOUs) tobegin to cut into the $8 billion of debt dragging down the IOUssince mid-year. An unprecedented lobbying and public communicationseffort by the utilities preceded the action.

Under pressure from marketers and now from the state’s attorney general about the legality of some proposed rules, the Georgia Public Service Commission dropped a plan last week to require natural gas marketers to forgive monthly bills sent to customers more than 90 days late. Instead, the PSC unveiled a new package of rules that among other things would heavily fine marketers for repeated and willful noncompliance.

Under pressure from marketers and now from the state’s attorneygeneral about the legality of some of the rules, the Georgia PublicService Commission has dropped a proposal to require natural gasmarketers to forgive monthly bills sent to customers more than 90days late. Instead, the PSC unveiled a new package of rules thatamong other things would heavily fine marketers for repeated andwillful noncompliance.

After gapping lower on the open, natural gas prices continueddownward Monday amid weakness in crude oil prices and continuedmild temperatures expected this week and next. Bears saved theirbest for last and punctuated yesterday’s price statement with a4-cent sell-off in the last five minutes of trading. The Novembercontract closed at $5.364, down 17.3 for the session.

Facing more power alerts, near-record demand and strongpolitical pressure, the California Independent System Operator(Cal-ISO) Board Monday voted, 15-6, to lower the price cap to$250/MW for ancillary services, and spent another day discussingwhat combination of fixed-price supply deals and infrastructureupgrades can help the state avoid blackouts and rolling brownoutsthe rest of this summer. The price cap lowering is effective Aug.7.

By the end of last week with rising temperatures, peak demandand political heat, San Diego Gas and Electric Co. and theCalifornia Power Exchange (Cal-PX) worked out a proposal for theutility to purchase fixed price electricity through forward marketsalready in place at the Cal-PX over a longer term five- tonine-month period into next spring. SDG&E has asked stateregulators to okay the purchases at their Aug. 3 meeting.

Natural gas prices again came under selling pressure Monday astraders dealt with below-normal temperatures both outside theirwindows and also in the forecast. After gapping lower at the open,the August contract sifted lower throughout the session and dippedbriefly below key psychological support at $4.00 before closing at$4.002, 14.8 cent lower on the day.

As if crashing oil prices, fresh weather forecasts and the release of storage data were not enough Wednesday, the natural gas futures market was rocked again Thursday by a report of a pipeline rupture in the Gulf of Mexico (see related story this issue). Although the accident has since been dubbed a non-event, it produced a dramatic, if brief, spike in prices as commercial traders loaded up on contracts only to dump them just minutes later.