Reaction

Many energy stocks experienced another day of declines yesterday in reaction to FERC’s western power price mitigation order, while the stocks of some generators, marketers and utilities rebounded slightly as investment bankers attempted to put a positive spin on the expected impact of the order. Reliant fell 1.3% to $33.35. AES lost 51 cents to close at $42. El Paso was down 1.2% to $54.72, and Dynegy was down 33 cents to $44.05. But Williams gained a nickel to end the day at $35.21 and Enron rebounded from a new 52-week low to close out at $46.18, up $1.48.

As blackouts finally swept through California yesterday afterweeks of warnings, the initial reaction was negative to theCalifornia legislature’s proposals to cure the state’s powerproblems. Most observers concluded there was little indication thatthe proposals would either provide the power needed to keep thelights on in the state or solve the utilities’ financial woes.

Energy stocks took a pounding yesterday mainly in reaction tocontinuing uncertainty over the financial health of California’stwo largest utilities, Southern California Edison and Pacific Gasand Electric, which got a weak short-term prescription by stateregulators (see related story this issue).

As expected, the cash market used the bullish futures reactionto Wednesday afternoon’s storage report as a springboard foracross-the-board gains of about a dime or more Thursday. But a latescreen retreat, continued lack of cooling load in northern marketareas and the usual dropoff in weekend demand raised doubts aboutany further increases today.

On behalf of the Natural Gas Supply Association, Conoco GeneralManager Mike Johnson is scheduled today to recommend that thegovernment maintain a hands-off approach to the natural gas marketdespite concerns about a potential crisis from Senate Energy andNatural Resources Committee Chairman Frank Murkowski, Sen. CharlesE. Schumer (D-NY) and other lawmakers. Several congressmen andsenators have voiced concern recently about high prices, low storagelevels and rising demand (see Daily GPI, July 11).

Despite expectations for further weakening in natural gasfutures yesterday, the market surprised many observers by movingsharply higher after the American Gas Association reported a secondconsecutive weekly 78 Bcf increase in gas storage levels.

Initial reaction to the idea of consolidating the majorWashington D.C.-based energy trade groups under one umbrella seemsto be running from cold to warm, with some outright opposed to itand others at least willing to discuss it.

Initial reaction to the idea of consolidating the majorWashington D.C.-based energy trade groups under one umbrella seemsto be running from cold to warm, with some emphatically opposed toit and others at least willing to discuss it.

Despite the return of hot weather alerts and temporary voltagereductions among Northeast electric utilities Monday, spot gasprices found it tough going to build much further on Friday’smoderate gains. Gas demand was fairly strong, sources said, butnot big enough to boost prices any more than 1-2 cents at citygatesand in the Gulf Coast production area. In fact, several Gulf pointsturned in flat performances.