Temps

A strong performance by Columbia Energy Group’s transmission,distribution, and exploration and production operations last yearin spite of 17% warmer than normal weather and lower commodityprices was significantly tainted by several major blunders in itsenergy marketing operations.

Extreme cold, with both gas heating customers and electric powercustomers pulling on gas supplies, pushed demand on Pacific Gas& Electric’s gas system from 3 Bcf/d to 4.5 Bcf/d Monday,sending the California ISO into an emergency alert situation andforcing the cut-off of some interruptible power contracts.

For the second day in a row Thursday, natural gas futures dippedand rallied within a wide trading band. But in contrast toWednesday’s late price falloff, trading yesterday featured ashort-covering rally before the close that lifted the Januarycontract to its $1.959 settlement price.

Raymond James & Associates Equity Research group warnedclients this week a return to normal temperatures this winter couldbring a greater gas market surprise than expected. Winterconsumption spikes over the past two winters have trended downward,but that was because winter 1996/97 was nearly 5% warmer thannormal and last winter was nearly 9% warmer than normal, the firmnoted. Normal weather likely will bring a significant increase inconsumption and with it a significant increase in gas prices thiswinter compared to last.

Columbia Energy Group reported its second-quarter earnings weredown $16.6 million, or 20 cents per share, from 2Q97 primarilybecause temperatures in its service territory were 38% warmer thanlast year. Despite the loss, however, CEO Oliver G. Richard IIIsaid the company “continued to show improvements in operations,”citing reductions in operation and maintenance costs and a 57%increase from exploration and production operations. Richard alsonoted the massive expansion of Columbia’s customer-choice programsin Ohio and Pennsylvania, which have given 85% of its utilitycustomers the ability to choose their gas supplier.