Spot

Spot prices rebounded a quarter or more from weekend levels at most locations yesterday with many points exceeding bidweek levels in response to the futures increase on Nymex and some heating load in East Texas and California.

Rep. Joe Barton’s (R-TX) emergency legislation for California and FERC’s decision last week to rein in prices on emergency spot transactions in the state’s wholesale power market were broadsided by Democrats on the House Energy and Air Quality Subcommittee Tuesday.

Following more than a nine-hour delay to the start of FERC meeting yesterday, a very divided Commission voted out a controversial market monitoring and mitigation plan that will attempt to tame wholesale power prices in the ailing California energy market over the next year.

Acknowledging that the state’s cost for spot wholesale power supplies has increased significantly since the PG&E utility bankruptcy filing, the newest member of the California Public Utilities Commission lashed out at merchant generators and power suppliers last week for “manipulating” the western wholesale electricity market and extracting billions of dollars out of the states’ economies. If the situation does not ease soon, Gov. Gray Davis is likely to seize some of the private sector power plants, according to Geoffery Brown, a former San Francisco public defender named to the CPUC by Davis earlier this year.

Acknowledging that the state’s cost for spot wholesale power supplies has increased significantly since the PG&E utility bankruptcy filing, the newest member of the California Public Utilities Commission Wednesday lashed out at merchant generators and power suppliers for “manipulating” the western wholesale electricity market and extracting billions of dollars out of the states’ economies. If the situation does not ease soon, Gov. Gray Davis is likely to seize some of the private sector power plants, according to Geoffery Brown, a former San Francisco public defender named to the CPUC by Davis earlier this year.

Spot price records could be tested again this week in SouthernCalifornia, where the market yesterday nearly mimicked what tookplace in early December when prices reached a new record at$58.76/MMBtu. SoCal started the day around $20 and then soaredabove $40 before coming back down to the low $30s. Strong heatingand power generation demand and stringent balancing requirements onSouthern California Gas’ system due to low storage levels, promptedthe market move.

As spot gas prices in California were breaking records again Friday with $61/MMBtu quotes being reported at PG&E’s Citygate, some state officials already started dubbing the upcoming heating season as California’s “winter of discontent.”

Spot gas prices into California broke Daily GPI’s nationwideall-time record high of $39 at the Chicago citygate, set in Feb.2, 1996 trading. A western trader for one marketing firm reported adeal for $41 at the Southern California border Wednesday, saying,”And I’ve got my confirmation from EOL [EnronOnline] to prove it.”California was just part of a hyperpowerful cash market that hadmost points exploring price territory they had never seen before.

Spot prices appeared to be aimed at escaping earth’s orbit Mondayas they skyrocketed by huge amounts, led by several western pointsrecording increases in triple digits. A strong screen had someinfluence, but it was frigid weather saturating most of the NorthAmerican continent and prompting a plethora of pipeline OFOs (see Transportation Notes) that played thebiggest role in a market that awed many participants.