NGI The Weekly Gas Market Report

The NewPower Co., a subsidiary of NewPower Holdings Inc., signed a definitive agreement to acquire the customers and related assets of AES Power Direct, a retail marketing subsidiary of AES Corp. The company has also signed a definitive agreement to purchase the customers and natural gas inventory related to the Columbia Gas of Ohio and Dominion East Ohio gas customer choice programs of CoEnergy Trading Co. CoEnergy is a subsidiary of DTE Energy Co. Together, the deals significantly expand NewPower’s presence in Ohio, where the company will add over 82,000 natural gas and electric customers, and in Pennsylvania, where NewPower will add approximately 38,000 natural gas customers. The deal also marks NewPower’s entrance into the service territories of four additional utilities: Dominion Peoples, Dominion East Ohio, Toledo Edison and Ohio Edison. NewPower is also entering the gas market for Cincinnati Gas & Electric. As part of the AES Power Direct transaction, NewPower will acquire related natural gas inventory, supply and transportation contracts and infrastructure, including billing and customer service, in Peoria, IL, and Toronto, ON. NewPower will acquire from AES Power Direct and CoEnergy a total of approximately 112,000 natural gas customers in the service territories of Columbia Gas of Pennsylvania, Columbia Gas of Ohio, Dominion Peoples, Cincinnati Gas & Electric, Dominion East Ohio, and Washington Gas Light customers in Virginia and Maryland. In addition, NewPower will add approximately 7,000 AES Power Direct electric customers in the Toledo Edison and Ohio Edison markets.

Pointing out the potential for market power abuses during this summer’s peak demand periods, the New York Independent System Operator (NYISO) has asked FERC to give it a quick go-ahead to penalize for repeated abuses of market power in the Empire State.

Kern River Gas Transmission announced last Monday it had completed construction and was flowing gas through emergency expansion facilities on its Kern River natural gas transmission system. The expansion, which consisted mostly of adding compression, increased delivery capacity of the Wyoming to California pipeline by 135,000 Dth/d.

Reflecting the nose-dive in wholesale prices, Southern California Gas Co. in July whacked its retail prices to residential and small business customers by 48%, dropping from 52.1 cents/therm in June to 27 cents this month.

The Department of Transportation (DOT) on Friday gave El Paso Natural Gas the go-ahead to re-start on a restricted basis the South Mainline line that ruptured and caused the fatal explosion in New Mexico nearly a year ago (see NGI, Sept. 4, 2000), interrupting supplies to the southwestern and California gas markets for weeks and months afterward.

Dominion East Ohio announced recently that its sales customers will pay 29% less for natural gas than they now do under a new rate that will be frozen through April 29, 2002, due to an innovative gas cost recovery (GCR) filing made with the Public Utilities Commission of Ohio (PUCO). The company said about 580,000 of its 1.2 million customers will be affected by the change because they buy natural gas from the company at rates regulated by the PUCO. Other customers buy gas from competitive suppliers under market-based rates.

The near-term risk of more natural gas price erosion due to mild temperatures, high storage levels, the economic downturn and higher production levels across the nation led top industry analysts with Salomon Smith Barney (SSB), Lehman Brothers, ABN-AMRO, Simmons & Co. International, and Merrill Lynch to downgrade their 2002 stock price forecasts for several U.S. exploration and production (E&P) companies last week. Many of the same analysts also decided yet again to lower their respective 2001 and 2002 natural gas wholesale price outlooks.

Highlighting TransAlta’s increased attention to the generation side of its business, the company last Thursday said that it has signed an agreement to sell its Alberta-based transmission business to a consortium of companies collectively known as AltaLink.

The gas-thirsty U.S. market is drawing comers from around the world, with another consortium at work to export Bolivian liquefied natural gas (LNG) to the U.S. West Coast. France’s TotalFina Elf, Spain’s Repsol YP, Britain’s BP and British Gas, and Bolivia’s Yacimientos Petroli feros Fiscales Bolivianos are considering plans to export some of the country’s 6,000 Bcf in proven gas reserves to California markets.