Stabilize

Consumer unrest in the face of substantial retail power rate increases over the past 12 months throughout Oregon bubbled to the top last week with stronger calls for a consumer-county government spawned effort to buy Portland General Electric Co. (PGE) from its bankrupt parent, Enron Corp. The proposal envisions rolling back rates and turning PGE into a nonprofit utility. However, none of the local government entities has endorsed the proposal at this time.

In what it dubs as a “synthesis” of proven operating steps in both eastern and western markets, California’s non-profit electricity transmission grid operator, Cal-ISO, last Wednesday released its draft 2002 Market Design Plan as a starting point that it plans to refine later this month with input from market participants. The plan’s overall objective for what eventually must be a federally approved blueprint is to shrink the grid operator’s real-time market and provide more future wholesale price stability, according to Cal-ISO’s chief architect for the plan.

The natural gas futures market kicked off 2002 on Wednesday in much of the same way it concluded 2001 — by funneling to new lows amid undeniably bearish fundamentals. Traders didn’t need the release of fresh storage data (pushed back until today at 2 p.m. EST) to tell them that supplies are plentiful. Meanwhile, the downtrend remains intact and the current spate of cold weather is showing signs of moderating. The February contract took the news squarely on the chin, tumbling 10.5 cents to close at $2.465.

With gas prices tumbling fast and fundamentals decidedly bearish, producers have scrambled to lock in the highest wholesale rates available. Among others, Fort Worth-based independent XTO Energy Inc. said last week it has hedged 90% of its production through March 2002 at $4.30/MMBtu and has hedged 200 MMcf/d at $3.72 for the last three quarters of 2002. XTO is one among many independents who have touted their foresight in locking long-term rates when prices were considerably higher.

With gas prices tumbling fast and fundamentals decidedly bearish, producers have scrambled to lock in the highest wholesale rates available. Fort Worth-based XTO Energy Inc. said Monday it has hedged 90% of its production through March 2002 at $4.30/MMBtu and has hedged 200 MMcf/d at $3.72 for the last three quarters of 2002. XTO is one among many independents who have touted their foresight in locking long-term rates when prices were considerably higher.

In the immediate aftermath of the California Public UtilitiesCommission’s sweeping moves to stabilize the state’s electricityoperations, the regulators and the governor’s staff are sloggingthrough endless details that will have to be worked out ifcash-strapped investor-owned utilities are going to be able to paythe state and generators and still have enough left over to covertheir own costs.

Rep. Tony Hall (D-OH) has introduced legislation to create anatural gas reserve to help stabilize the market during times oflow supply and high prices. The proposed reserve would be modeledafter the Strategic Petroleum Reserve (SPR) and the Northeast HomeHeating Oil reserve, the latter of which allows heating oilsupplies to be drawn down during times of tight supply.

Rep. Tony Hall (D-OH) has introduced legislation to create anatural gas reserve to help stabilize the market during times oflow supply and high prices. The proposed reserve would be modeledafter the Strategic Petroleum Reserve (SPR) and the Northeast HomeHeating Oil reserve, the latter of which allows heating oilsupplies to be drawn down during times of tight supply.

Despite warming temperatures that already had begun the processof melting snows from Monday’s Nor’easter, the futures market wasable to arrest a further meltdown of its own Tuesday as buyers andsellers were evenly matched. In fact, Tuesday’s price action was soorderly, that not only did the market etch an inside day with highsand lows within Monday’s, but also posted an identical $1.717settlement price. And although some bulls were somewhat reluctantto claim the day as a victory, others viewed the market’s abilityto hold ground following the 25-cent price slide since lastWednesday as promising.