Squeeze

Winter temperatures and high gas prices can put a credit squeeze on local distribution companies (LDC) that don’t win in the gas market or win the favor of their regulators. Of 14 LDCs followed by Standard & Poor’s (S&P), all have a purchased-gas adjustment clause and all have some form of hedging policy, both positives for credit. But S&P also looks at business profile, supply position, and storage capacity when evaluating LDC credit ratings.

With the oil price squeeze, flat North American natural gas production and a strong gas storage surplus, “a trading range of $5-7/Mcf is likely to persist,” for the next year or two, said energy consultant Stephen Smith in a new report.

A tightening squeeze by high fuel prices and a regional surplus of generating capacity is pushing Alberta toward adding electricity to its traditional product lines of natural gas and oil as Canada’s principal energy exporting jurisdiction.

TransCanada PipeLines Ltd. has come up with a way to escape the cost and toll squeeze caused by excess capacity on its natural gas mainline — fill up the empty space with oil.

The market was able to squeeze out one more day of moderate overall price increases Tuesday, but between a sharp reversal in energy futures and warming weather trends, sources don’t expect that to continue Wednesday.

FERC last Thursday rejected an effort by California Attorney General Bill Lockyer to squeeze billions of dollars of refunds from power sellers into the state’s energy markets, disagreeing with the argument put forward by Lockyer that the Commission’s regulatory regime governing market-based rates violates the Federal Power Act (FPA) requirement that rates must be on file.

Except for sizeable drops at non-Malin California points, the rest of the market managed to squeeze a bit more price firmness Thursday out of weather extremes ranging from unseasonably cool temperatures throughout much of the East and record-setting heat in parts of the West. Upticks in the East, Southwest basins and Pacific Northwest were quite mild, only rarely going above a nickel. The Rockies generally were up a dime or more, and Malin soared by well over a dollar.

Astronomical gas prices could push another 3.5 Bcf/d of gasdemand out of the market next year, according to a research note byCambridge Energy Research Associates. While the high gas-usemarkets, such as fertilizer and methanol producers, already havecurtailed production significantly, CERA said it expects four moremajor demand responses: another wave of fuel switching to residualfuel oil by industrial boilers, a surge of investment to increasefuel switching capability, some potential switching to distillateoil and more industrial plant shutdowns.

Astronomical gas prices could push another 3.5 Bcf/d of gasdemand out of the market next year, according to a research note byCambridge Energy Research Associates yesterday. While the highgas-use markets, such as fertilizer and methanol producers, alreadyhave curtailed production significantly, CERA said it expects fourmore major demand responses: another wave of fuel switching toresidual fuel oil by industrial boilers, a surge of investment toincrease fuel switching capability, some potential switching todistillate oil and more industrial plant shutdowns.