Week

FERC Chairman James Hoecker earlier this week gave theoft-disputing segments of the energy industry, especially naturalgas, an ultimatum: either play nice and come to agreement with theCommission on the series of major proposed rulemakings now facingthem, or the agency will pull the plug on comprehensive reviews inthe future.

This week’s general price downturn almost came to a haltWednesday, but mild softness remained the norm for most points.Quotes tended to range from flat to down about a nickel. Marketareas were getting colder but not by much, sources said, and thatwas outweighed by further softness in futures. With little toinfluence it, trading activity remains on the quiet side, theysaid.

FERC Commission William Massey indicated last week that heviewed the proposed initiatives in the infamous notice of proposedrulemaking issued last July with a “substantial degree ofreservation and caution.” This is not “a done deal from myperspective,” he told a group of independent gas producers.

CMS Energy and Westcoast Energy filed an application with FERClast week for the U.S portion of their TriState Pipeline project, a650 MMcf/d gas pipeline that would extend to the Dawn Hub inOntario from Joliet, IL, near Chicago.

Futures traders are always looking to historical price patternsto predict future trends, but last week they were particularlyfocused on the last 40 trading days and the average of thosesettlement prices. Referred to as the 40-day, the prompt month’s40-day moving average has been an increasingly important indicatorfor those looking to predict a price move in the market. But boththe magnitude and duration of those swings have decreased in thepast several weeks, leading traders to hypothesize some of thedynamics in the market could be changing. Some of those changeshave been evidenced by the December contract’s inability to sustaina move much above or below the 40-day moving average in recentweeks. And last Friday was no different when the December contractrebounded 6.5 cents to settle at $2.459, just 1.4 cents below the40-day.

FERC last week approved, subject to modifications, a majorsettlement that spells out how Natural Gas Pipeline Co. of America(NGPL) will auction off long- and short-term transportationcapacity on its system. The decision was seen as a big win for theMidwest pipeline, with the Commission siding with it on keycontested auction-related issues.

The signing by the United States last week of the Kyotoagreement limiting greenhouse gas emissions elicited jeers onCapitol Hill and in some energy circles. The move was seen as “moreof a gesture of goodwill” to encourage commitments from developingcountries that are attending the conference now underway inArgentina, according to Capitol Hill and gas industry sources. Theyseriously doubt President Clinton will submit the controversialaccord to the Senate, which is sharply opposed to it.

After taking Aquila Gas Pipeline off the auction block inAugust, UtiliCorp United announced plans last week to buy back 5.4million common shares of the company, representing the 18% ofoutstanding AQP common shares it does not already own, for $8 pershare. The price represents a 23% premium to the closing AQP shareprice of $6.50 on Nov. 11.

The proposed mega-merger of American Electric Power (AEP) andCentral and Southwest Corp. (CSW) was placed on hold earlier thisweek as FERC set the case for an evidentiary hearing, saying that”sufficient concerns” had been raised about potential market powerin both the transmission and generation arenas.