Rates

FERC voted out a final rule that imposes a major (price and volume) reporting requirement on natural gas transporters and sellers to California until September 2002 in an attempt to bring gas prices there in sync with other major markets around the country.

Contrary to the charges of price gouging in the California market, Duke Energy said Friday its average rates for wholesale power sales over the last 15 months were only $76/MWh, and in the first quarter of 2001 rose to only $136/MWh, both well below average spot market prices for the same periods.

Amid a buzz about higher retail rates and the need to conserve to cut down on summer’s looming blackouts, California Gov. Gray Davis Wednesday signed a new law (SB 6X) creating the “California Consumer Power and Conservation Financing Authority,” which will have broad powers to construct, own and operate electric generation and power facilities and finance energy conservation programs. The law becomes effective in 90 days.

California regulators Tuesday took several steps to implement higher electricity rates and stepped up load management, assure payment to the state’s wholesale power buying program and examine whether the parent corporations for the three largest investor-owned utilities have done enough to assure their financial viability during the persistent crisis surrounding supplies and prices.

California regulators are expected today to authorize an estimated $3 billion in utility revenues from increased retail power rates to cover all of the state water resources department (DWR) costs for buying wholesale power in the upcoming months before more moderately priced, long-term, fixed-rate contracts kick in.

Based on current withdrawal rates, working gas inventory andanticipated load forecast, Questar said Thursday it expects to go intocompressed withdrawal mode at the Clay Basin storage facility withinthe next three to seven days. This prompted concern by Northwest thatsuch an action will cause it “to begin to accumulate unmanageablelevels of condensate liquids at its Green River [WY] compressorstation similar to last year, when Questar had to reduce its confirmedquantities to Northwest” (see Daily GPI,Feb. 14, 2000; Feb. 23, 2000). Bothpipes said they are working together to manage liquids at GreenRiver. Questar noted that to mitigate future impact, it plans to builda dewpoint plant at Clay Basin. Permitting is under way andcompletion is expected in late summer, Questar said. A pipelinerepresentative said “compressed withdrawal” is the difference betweenfree flow, which is the normal operational mode for Clay Basin untilabout mid-January each year, and using compressors to suck gas out ofthe ground. Currently Clay Basin is about 32% full for thenon-Questar-contracted 54 million dekatherms held by seven or eightmajor customers including Northwest, he said. Using compression inwithdrawals heats the gas so it takes longer to cool down and for theliquids to condense out of it; thus the liquids tend to form afterit’s gotten out into the pipeline, he said.

FERC had a very busy day yesterday on the natural gas side.First, it upheld its July order in which it awarded a certificateto the Midwest-to-East Coast Independence Pipeline, fending offcontinuing questions about the binding nature of the project’sprecedent agreements and its market need. Federal regulators alsogave the go-ahead for Phase II of ANR Pipeline’s Wisconsinexpansion, a Reliant Energy Gas Transmission expansion in Arkansas,and awarded a preliminary determination to Transcontinental GasPipe Line for its proposed Sundance expansion in the Southeast.

Forest Oil Corp. announced the completion of the Liard pipelineand initial production from the P-66A Well in the NorthwestTerritories. Production rates are anticipated to increase graduallyduring the next several weeks to a target rate of 35 to 50 MMcf/d,resulting in net sales of gas by Forest of 15 to 20 MMcf/d.Production is being transported and processed through the Westcoastsystem. Based on current prices, processing and transportationfees, and production costs, the netback for the production fromthis field is US$2.25/Mcf, the company said. Production from theFort Liard area is the first new gas to be brought on stream in theNorthwest Territories since the Pointed Mountain field in the early1970s. Forest has achieved production within 40 months of itsinitial participation in the Flett exploration program. Thisrepresents a significant achievement considering the remotelocation and lack of infrastructure in the area. It is expectedthat substantial reductions in cycle times will be achieved as aresult of the company-owned facilities now in place.

Duke Energy Gas Transmission has named Tom O’Connor, TheopolisHoleman, Dorothy Ables and Richard Kruse to new positions as seniorvice presidents. This new market-oriented executive team willreport to Robert B. Evans, president of Duke Energy GasTransmission, and will be responsible for the management of DukeEnergy’s interstate natural gas pipelines.