NGI The Weekly Gas Market Report

Bucking the current trend of building natural gas-fueled power plants, Reliant Energy Seward LLC — a unit of the Reliant Energy Wholesale Group — reported that it has plans in the works to build a power generating facility in western Pennsylvania that will use the latest clean-coal technology on waste coal.

Denver-based Barrett Resources Corp. said Friday it will recommend that its shareholders reject Royal Dutch/Shell Group’s takeover bid, calling the $55 per share cash tender offer “inadequate and not in the (company’s) best interests.” Shell, eager to enter the gas-rich Rocky Mountains, launched its hostile bid earlier this month, after being rejected in informal discussions with Barrett executives (see NGI, March 12).

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PG&E’s National Energy Group (NEG) announced the winning bidders in a recent open season for expansion capacity on its Gas Transmission-Northwest (GTN) pipeline system. Two power generators, Newport Northwest LLC and Calpine, were awarded 200,000 Dth/d of firm transportation capacity that will be available in 2002. The pipeline also is proceeding with another capacity offering that will convert to new firm service in 2003.

As California suffered through two consecutive days of daytime darkness last week, FERC regulators remained as divided as ever over whether to impose price caps on wholesale power sales in the West to help alleviate the continuing crisis.

The New England Power Pool (NEPOOL) has filed an energy conservation program with FERC that is designed to encourage reduced consumption of electricity during peak demand periods and help moderate price fluctuations in the wholesale electricity market. The program could reduce the daily energy requirement in the region by 300-600 MW and produce annual savings of $30 million.

Illustrating the tremendous demand growth that has nearly crippled California’s energy market, Kern River Gas Transmission announced a plan last week to more than double the amount of gas it transports to the state from Rocky Mountain region supply basins.

There are dangers down the road in relying solely on natural gas-fired electricity generation for both companies and consumers, according to Energy Security Analysis Inc. (ESAI) in its Natural Gas Power Alert released last week. The firm said the risk of not diversifying a portfolio with coal-fired or oil-fired generation greatly increases the exposure of a company or a state to the volatile natural gas market.

Merrill Lynch urged investors in energy marketing stocks to “proceed with caution” during this period of “finger pointing” in California. “Outrageous claims and ignorance appear to be the themes of the day,” the Wall Street analysts said in a bulletin titled “Santa Claus, the Tooth Fairy and Leprechauns Do Exist – Just Ask California.”