Success

The two biggest successes of FERC’s Office of Market Oversight and Investigations (OMOI) during its first year were a record $20 million civil penalty brought against Transcontinental Gas Pipe Line Corp. for engaging in marketing affiliate abuse, and a $1.7 billion settlement to resolve charges that El Paso Corp. drove up natural gas prices in California during the state’s energy crisis, said OMOI Director William F. Hederman Tuesday.

Hoisted somewhat on the petard of its own success and a shrinking merchant power market nationally, San Diego, CA-based Sempra Energy and its two principal utility subsidiaries had their credit ratings downgraded Wednesday by Standard & Poor’s, reflecting Sempra’s increased earnings from the nonutility businesses, particularly energy trading.

For the first time since a marathon success streak began with the advent of the “continental market” in the mid-1980s, Canadian natural gas exporters have weathered a setback in the United States. On the heels of posting the 14th consecutive record year for the trade in 2001, new data showed Canadian sales, prices and revenues all took dives, as export deliveries ran afoul of a warm winter, a slowing economy, fuel-switching and surplus supplies in storage.

Dynegy Chairman Chuck Watson said his company is “encouraged” by Enron’s success in extending a deadline on a $690 million obligation until mid-December and is “working to accelerate the regulatory approvals required to complete the merger with Enron Corp.” in light of the continuing free fall of Enron’s stock Wednesday. The stock fell more than $2 early in the day to $4.75 but moved back above $5 following Enron’s announcement that it was able to find some breathing room.

Dynegy Chairman Chuck Watson said last Wednesday his company was “encouraged” by Enron’s success in extending a deadline on a $690 million obligation until mid-December and is “working to accelerate the regulatory approvals required to complete the merger with Enron Corp.” in light of the continuing free fall of Enron’s stock. The stock fell more than $2 early Wednesday morning to $4.75 but moved back above $5 following Enron’s announcement that it was able to find some breathing room.

Houston-based Burlington Resources Inc., hoping to duplicate its success in the gas-rich San Juan Basin, on Tuesday agreed to purchase Calgary’s Canadian Hunter Exploration Ltd. for C$53 a share, or $2.1 billion in cash (C$3.3 billion), gaining about 1.2 Tcf and 6.2 million bbl of estimated proved reserves and nearly two million net undeveloped acres and seismic data. When the transaction closes, Burlington will have 90% of its production focused on North American natural gas, with 40% in Canada.

Among the many lessons to be learned from California’s energy debacle is that restructuring has a better chance of succeeding when more of the power in a market is free to respond to price signals, according to a recent report issued by the Congressional Budget Office (CBO) examining the causes and lessons of California’s electricity crisis.

Fresh off their success in not allowing natural gas to dip below major support on Monday, natural gas bulls reared their horns yesterday as they prodded prices to a constructive opening print. However, further advances were hard to come by, leaving the market to check mostly sideways for the rest of the session. The August contract closed at $3.165, a hike of 9.7 cents on the day.

While some may argue that California’s energy woes offer a prime reason for placing the electric competition genie firmly back in its bottle, a recent case study by a global consulting group asserts that California’s energy difficulties mask the fact that other power markets in the United States are not only surviving, but thriving, with the PJM market serving as the perfect example.