With record high spot and futures prices last week, continuedcold weather and bullish supply and demand projections, LehmanBrothers didn’t pick a bad week to raise its Henry Hub priceforecasts by about 20% for both 2001 and 2002.
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Those in a counting their chickens mode relative to all theplanned new natural gas-fired generating capacity waiting in thewings, might want to consider a new analysis of just how efficientthose new plants will be. Energy Ventures Analysis (EVA) ofArlington, VA reckons gas displacement by new more efficientgas-fired combined cycle units will total over 250 Bcf/year inTexas and over 100 Bcf/year in California from 2003-5. That’s notto say gas use will decline, because load growth will swallow upsome of those savings, but “the initial gas demand growth rate inthese key regions will be dampened.” The efficiency factor of theswitch to the latest turbines from older steam generation unitswill be most pronounced in those two states, but will have animpact in other areas as well. EVA’s report, “Outlook for Gas-FiredCapacity Additions,” points to 411 gas turbine projects, generating190,980 MW, which are expected to be completed, primarily betweennow and the end of 2003. Where the new units replace oil or coalgeneration, the switch will be a plus for natural gas, but incertain areas they will be replacing older gas hogs as well. EVA’sforecast is part of its “FUELCAST” study which addresses the longterm outlook for fuel and electricity markets.
CA Regulators Grant PG&E Scaled-Down Rate Increase
With a relative whimper, not a bang, a major rate case forPacific Gas and Electric Co. ended last Thursday with Californiaregulators on a 3-2 vote giving the utility about one-third of whatit originally requested. The raise still is quite large, however,at $229 million/annually, including a 6% hike in gas rates. Thehike amounts to about another $20/year for the typical residentialcustomer. Electric rates were hiked by $136 million/year, but therewill be no change in those rates because of the ongoing rate freezethat’s been in effect since 1996 as part of the state’s electricindustry restructuring.
CA Regulators Grant PG&E Belated, Scaled-Down Rate Hike
With a relative whimper, not a bang, a major rate case forPacific Gas and Electric Co. ended last Thursday with Californiaregulators on a 3-2 vote giving the utility about one-third what itoriginally requested. The raise still is quite large, however, at$229 million/annually, including a 6% hike in gas rates. The hikeamounts to about another $20/year for the typical residentialcustomer. Electric rates were hiked by $136 million/year, but therewill be no change in those rates because of the ongoing rate freezethat’s been in effect since 1996 as part of the state’s electricindustry restructuring.
Rockies Less Produced than Other Regions
After years of having been plagued by low prices relative to theHenry Hub, Rocky Mountain producers appear to be well positioned tohelp meet the projected 30 Tcf gas market. Even when Canada isconsidered, less gas has been drawn from Rockies basins on apercentage of projected reserves basis than from other NorthAmerican producing regions, noted Thomas A. Petrie of PetrieParkman & Co.
Weather, Screen Heat Up June and July Quotes
Those bemoaning a relative lack of volatility in much of thecash market since early spring must have enjoyed Tuesday. Thingswere very strong-“to put it mildly,” as a marketer said-in tradingTuesday for both the month of July and the last day of June. It wasobvious to everyone what was heating up prices: heat now andforecasts of more heat later. A strong showing by the August HenryHub futures contract lent further support to cash.
Flat Again; NOVA Rupture’s Impact Brief and Small
Sources were searching for new ways of expressing “flat” as1999’s relative lack of volatility in day trading continued Monday.A lot of zeroes were showing up in the average-change column of theprice table even as lack of fundamentals again failed to depresscash numbers. A Southwest trader reporting “not much demand andplenty of supply available” was surprised that prices weren’t goingdown.
Northeast Flatness Contrasts with Big California Drop
Cash price changes for the weekend varied widely, ranging fromrelative flatness in Appalachia and Northeast citygates to drops of10-20 cents at the California border. The big weakness inCalifornia numbers was due to trader fears of weekend OperationalFlow Orders by SoCal Gas and PG&E, whether or not they evermaterialized, sources said. (Neither utility had an OFO in effectas of Saturday.) However, SoCal was cutting all as-availablestorage injections, helping to keep Topock prices depressed, amarketer said.