Daily GPI

Turning an about-face that was almost as stunning as that in energy futures, the cash market followed up Tuesday’s rebounds by recording price drops Wednesday that tended to range from a little less than a dime to more than half a dollar. A majority of the losses were between a dime and a quarter.

In what looked like a carbon copy of Monday’s price action, natural gas futures gapped lower at the open Wednesday and then worked their way higher throughout much of the session on moderate commercial buying interest. However, in stark contrast to Monday when prices ended on their highs, natural gas futures fell dramatically at the close Wednesday in sympathy with a massive sell-off in the nearby crude oil pit. June natural gas closed at $3.64, down 21.5 cents on the session and just a penny above its $3.63 low on the day.

Sen. Byron Dorgan (D-ND) called for a full investigation into the “behavior and contacts” of the Federal Energy Regulatory Commission to find out why it sat on the sidelines while Enron Corp. engaged in wholesale manipulation of energy prices in California and other western states. He also proposed that a special counsel be named to probe energy prices in western markets.

Senate Governmental Affairs Committee Chairman Joseph Lieberman (D-CT) expressed “deep concern” over the ability of the Federal Energy Regulatory Commission to “appropriately” monitor and regulate energy markets, citing the past failure of the agency to follow “important warning signs” that signaled potential problems at Enron Corp. and the ultimate impact this would have on the entire energy industry.

Correction: In the following story,NGI made an error when reporting that CMS Energy Corp. announced that$1 billion in trading revenue in 2000 and 2001 came from round-triptransactions. CMS Energy Corp. actually had $4.4 billion in tradingrevenue that came from round-trip transactions. NGI regrets the error.

Standard & Poor’s reported Wednesday that at least 23 companies in the United States and Europe — including Aquila Inc., Dominion Resources Inc., Dynegy Inc., Mirant Corp., Reliant Resources Inc., PG&E National Energy Group and Williams Cos. — have credit triggers that could lead to a liquidity crisis if they had a credit ratings downgrade or they missed other financial targets. Of the companies considered most vulnerable to a cash drain, S&P found more than half of those surveyed are energy businesses.

El Paso said it is finally nearing completion of the All American oil pipeline conversion and its integration into the southern pipeline system. All American was bought by El Paso from Plains All American Pipeline LP in February 2000 (see Daily GPI, Feb. 4, 2000). The pipe segment extends 1,088 miles from McCamey, TX, to Emidio, CA, and will boost system flexibility by adding 230 MMcf/d of capacity this year on the southern system from the Permian Basin in West Texas to markets in Arizona and California.

An analysis of the top 50 U.S. companies found that reserve replacement costs were the second highest in five years, escalating 73% last year, reaching $8.20/boe, according to a new report by John S. Herold. Meanwhile, reserve replacement rates declined sharply, with the top producers replacing 162% of natural gas production, down 34% from a year earlier, and 141% of oil production, 40% lower than 2000.

California’s often fractious regulatory commission Thursday will be tested on two natural gas issues involving Southern California Gas Co. and its Sempra Energy utility affiliate, San Diego Gas and Electric Co. It was unknown Wednesday whether the political majority of four Democratic-appointed members of the five-member commission would prevail or a newly crafted coalition among the two newest Democrats and a veteran Republican holdover.