NGI The Weekly Gas Market Report

Even with more federal regulatory intervention and a return to closer-to-normal hydroelectric supplies in the future, California is facing at least two more years of electricity supply-demand imbalance and the prospect for higher wholesale power prices as a result, according to Andre Meade, utility analyst at Commerzbank Securities.

SCANA’s South Carolina Pipeline Corp. (SCPC) is fundamentally changing the way it does business in an effort to better market its pipeline capacity and expand its service territory. The company announced plans last week to voluntarily open its pipeline system to transportation-only service and discontinue gas sales service. It intends to file an application for the switch with the Public Service Commission of South Carolina (SCPSC) next month.

The Public Utilities Commission of Ohio (PUCO) last week issued for comment staff-proposed new rules for competitive retail natural gas service and providers of the service. As a result of amended Ohio Substitute House Bill 9, which was signed into law by Gov. Bob Taft in March, the commission’s authority over gas providers in the state has been significantly expanded (see NGI, May 21).

The Federal Energy Regulatory Commission by a 5-0 vote last Monday extended its power market mitigation program across the western states 24 hours a day, seven days a week through September, 2002, with a two-part cost-based formula addressing spot prices during emergency and non-emergency periods (EL00-95-031). The new mitigation program went into effect June 20.

Conceding that federal regulators belatedly have taken steps to offer wholesale power price relief, California Gov. Gray Davis last week announced an agreement with Sempra Energy’s San Diego Gas and Electric Co. that wipes out a $740 million debt the utility was facing for uncovered wholesale electricity costs. The state will buy SDG&E’s transmission lines for just under $1 billion, or 2.3 times book value, and commit to provide all of its native generation to the state on a cost-based, below-market basis.

Islander East Pipeline Co. LLC., a joint venture of subsidiaries of Duke Energy and KeySpan Corp., filed an application with FERC to construct 50 miles of interstate gas pipeline that will transport gas to growing markets in Connecticut, New York City and Long Island, NY. First announced in late January (see NGI, Feb. 5), the 250 MMcf/d pipe is expected to be in service in 2003.

FERC has cited three California power suppliers for selling electricity during Stage Three emergencies in May at prices that exceeded the allowed limit established by the Commission.

FERC’s widely-anticipated move last week to extend price controls on bulk electricity transactions to the entire Western region around the clock blew through Washington with hurricane force, shifting the political winds away from price caps in the Senate. However, just as the volatile issue of price caps began to subside somewhat on Capitol Hill, a new debate emerged in Congress over whether the agency should be more aggressive in ordering generators to provide refunds for overcharges that California Gov. Gray Davis said run into the billions of dollars.

Nature’s severe downturn in the amounts of hydroelectricity in the western region over the past 12 months has been a giant wake-up call for natural gas as new gas-fired power plants are spurring an unprecedented rush to build added interstate pipeline transmission into Washington and Oregon.