Straight

Abandoning straight-fixed variable rate design (SFV) in favor ofone that would permit recovery of some pipeline fixed costs in theusage rate would resolve a lot of the competitive concerns raisedby FERC in its mega-notice of proposed rulemaking (NOPR) and noticeof inquiry (NOI), New York regulators and a coalition of utilitiessaid in separate, yet complementary filings last week.

A group of 27 LDCs Monday proposed eliminating thestraight-fixed variable (SFV) rate design for all interstatepipelines in favor of a rate design for base or “recourse” servicethat recovers 35% of a pipeline’s fixed costs in the usage rate.

Following three straight days of advances the bears reclaimedthe futures market last Friday when early selling pressure piercedthrough several interim levels of support. From that point the routwas on as the February contract plummeted sharply lower inafternoon trading. Only the final bell could halt the decline thatleft the prompt month down 11.4 cent to $1.778.

The cash market continued to muddle around with essentially nodirection for a second straight day Friday, leaving weekend numbersmostly unchanged. The few drops of about a nickel occurred atWestern points-intra-Alberta, Stanfield, Malin and SouthernCalifornia border-and chiefly resulted from the lifting of supplyand/or transportation constraints that allowed more gas back intothe market.

The futures market concluded what one trader described as a”tumultuous trading week” by slipping for the fifth straight day,leaving futures at their lowest level since March 1997. There was alittle something for everyone in the market last week: speculativeselling, a bullish storage report, and even a little hurricanehype. The only thing missing from trading last week was a dayregistering a gain. That left even the most bullish of tradersscratching their horns wondering when the market will reverse itsdowntrend. The September contract closed at $1.844 on Friday, down6.2 cents. Friday’s With that, the market concluded the month ofJuly. A month that saw major declines in both cash and futuresmarkets eroding the September contract nearly 30 percent of itsJuly 1 value.

The May futures contract suffered a third straight day of lossesby slipping a mere 0.6-cents to settle at $2.469 in relativelyquiet trading. The session was marked by light selling as bearsprobed for sell-stops but was kept in check by buying ahead of the2.435-.440 level. A modest 31,695 contracts changed hands in asession that saw no new fundamental developments.