Yesterday

A FERC majority yesterday reaffirmed the right of interstatepipelines to “reasonably withhold” their consent for customers topermanently transfer their contract liabilities to third-partyreplacement shippers under capacity releases.

Retail gas marketers got some good and bad news from BaltimoreGas & Electric Co. yesterday. The bad news was transportationcustomers have to start paying the state’s 5% sales tax for thefirst time starting in May so alternative suppliers will have amuch tougher time beating the regulated gas sales price. Thecompliance division of the state Controller’s office informed BGEof the tax change in January.

Denver-based KN Energy (KNE) made a big entrance into thegas-fired power generation business yesterday by purchasing 10% ofthe generation in the state of Colorado and becoming the largestindependent power producer in the state. It purchased Denver-basedThermo Co., an electrical engineering firm that specializes indistributed power. The deal is designed to prepare KNE for eventualelectric industry deregulation and competition in its home state.

MichCon announced plans yesterday to give all of its 1.2 millionretail gas customers a choice of suppliers over the next threeyears. The Detroit-based distributor filed an application with theMichigan Public Service Commission for the program earlier thisweek. It is designed to begin next January with 225,000 customers.The plan also would reduce gas costs by 7% to $2.95/Mcf and freezethem for three years for those customers who continue to useMichCon as their gas provider.

If bullish natural gas futures traders became excited when theMay contract moved above the $2.70 mark yesterday morning, theirenthusiasm was tempered following the spot month’s daily close of$2.689. Although this represents a daily gain of 2.1 cents, onetrader is concerned that futures prices will be falling in the daysto come. “I was hoping a break above $2.70 would lead to a move to$2.80, but traders seemed pretty quick to slam the door. It lookslike profit taking has started ahead of the long holiday weekend,”he said. The New York Mercantile Exchange will be closed for GoodFriday.

The Clinton administration finally unveiled its long-awaitedrestructuring program for the electric industry yesterday in aseries of meetings with congressional leaders, stakeholders and themedia. The plan, which did not include specific legislativelanguage, represents a pragmatic position that its proponentsbelieve has the best chance of forging a compromise betweencompeting interests to arrive at comprehensive restructuringlegislation, if not in this session of Congress, then “very soon,”according to Energy Secretary Federico Pena.

Bammel Natural Gas Storage and its connections to Houston PipeLine are due for a major upgrade, Enron announced yesterday. Thecompany plans to drill four new storage wells and construct a12-mile, 30-inch diameter pipeline adjacent to an existing HPL linethat will increase Bammel’s withdrawal capacity nearly 20% to 1.4Bcf/d. The $28 million project is designed to enhance services forHPL’s Texas Gulf Coast industrial markets and Houston-based gasutilities, Enron said. It is expected to be completed by year end.

Despite already having held a series of hearings on the project,FERC yesterday set for hearing the issue of whether the market needfor a controversial liquefied natural gas (LNG) facility plannedfor a Maine community could be better met by alternative pipelineprojects.

PG&E Corp. and Ultramar Diamond Shamrock Corp. (UDS)announced yesterday they had signed a letter of intent to enterinto what is probably the largest energy purchase alliance to datein the industry, representing about $2 billion in electricity,natural gas and steam purchases over a seven-year period. UDS isone of the largest independent refiners in the U.S., with sevenrefineries in the U.S. and Canada processing 650,000 barrels perday, 6,400 branded retail gasoline/convenience stores, and a largehome heating oil business in the Northeast.