Surprising

The market astonished many traders with its show of weekendstrength Friday. They had anticipated that a week of falling priceswas about to reverse, but few if any were looking for much morethan flat numbers at most points. Instead, only small declines atStanfield and Kingsgate differed from increases ranging from about20 cents in the Rockies to triple digits in California.

After trading within an extremely tight, 3.5-cent range for mostof yesterday’s session, natural gas futures were lifted by a waveof buying that hit the market literally seconds after the AmericanGas Association released one of its most bullish storage reports sofar this injection season.

On reflection, the most surprising aspect of the past two monthsof California’s roller coaster electricity prices is that thepeople who pieced together the state’s power deregulation plans —state legislators and regulators — are voicing the loudestconcern about the first real dose of free-market price volatilityfelt by retail mass consumers, who, it might be added, are alsovoters. In a free market, heavy demand butting heads withconstrained supplies will result in the blood of high pricessplattering everyone.

The somewhat surprising recent firmness of swing prices held uponce again in most cases Friday, refusing to yield to either thenormal drop in weekend demand or a continuing dearth of fundamentalweather support.

In a surprising bit of candor, the chief political architect ofCalifornia’s 1996 electric industry restructuring law last weekrevealed that out-of-state energy companies paying high prices forgeneration assets, exceeded state lawmakers goals of gettingconsumers out from under the enormous stranded costs of the state’sthree major investor-owned utilities.

In a surprising bit of candor, the chief political architect ofCalifornia’s 1996 electric industry restructuring law told a groupof industry participants at a statewide energy roundtablediscussion in San Diego that the state’s lawmakers intentionallyderegulated generation to draw out-of-state capital to pay off theenormous stranded costs of the state’s three major investor-ownedutilities.

The cash market was mostly flat to a few cents softer Friday,surprising more than one source who had expected bigger declinesbased on the usual slump in weekend demand. Apparently a new winterstorm revving up in the Midwest had traders nervous about going tooshort. Also, some well freeze-offs were reported affecting allpipes in Oklahoma to small degrees. A Tulsa marketer said mostpeople were going home early after icy roads caused the schools toclose.

Surprising even itself, Consumers Energy announced last weekthat in only eight months of the Gas Customer Choice program,100,000 of its customers switched to an alternate supplier,reaching the limit for the first year of the plan. Out of the 10suppliers vying for Consumers’ market, Sempra Energy affiliateEnergy America-Michigan topped the list by signing 90% of theenrollments, a Michigan Public Service Commission (MPSC)spokesperson said.

The hemorrhaging of prices that marked the first two days oftrading in the December aftermarket came to a virtual standstillWednesday even as unseasonably warm weather continued in much ofthe nation east of the Rockies. Except for an increase of more thana dime into Northwest at Sumas, all points were either flat or upor down only a few pennies. The reason for the surge at Sumas andwhy it was handily outstripping Rockies prices was that distributorBC Gas in southern British Columbia was drawing more heavily thanusual on discretionary supplies, one source said.