NGI The Weekly Gas Market Report

Southern Company launched a new subsidiary, Southern Power Co., last week that will own, manage and finance wholesale generating assets in the Southeast. The subsidiary will market to wholesale customers in the fastest-growing wholesale electricity market in the country, the company said.

The amount of new gas-fired power generation planned for the next two years reveals the rather alarming possibility that an additional 10 Bcf/d of gas demand could be added to the gas market before the end of 2002 from power demand alone, according to a report by Raymond James & Associates.

Due to cold weather and falling U.S. production, it is likelythat the oil and gas industry will not be able to refill naturalgas storage for the winter of 2001-2002, according to a LehmanBrothers exploration and production update released last week. Thelow storage levels will likely force gas prices higher for aprolonged period of time, the report stated.

FERC last week ordered El Paso Merchant Energy and El PasoMerchant Energy-Gas L.P. to stop stonewalling and turn overprotected materials to parties involved in a complaint case thatalleges the affiliates received preferential treatment when theyacquired 1.2 Bcf/d of California-bound firm capacity on El PasoNatural Gas.

“Hope” was the operative four-letter word in California last week if you had anything to do with the energy industry or government as Friday saw the previous day’s specter of rolling blackouts from razor-thin electricity reserves ease.

In a strategic move said to benefit both midstream energycompanies, CMS Field Services Inc. has swapped some of its naturalgas assets in Oklahoma and Kansas for some of Duke Energy FieldServices’ similar assets onshore and offshore Louisiana.

The Kansas City, MO, city government has voted to give naturalgas consumers some relief from high natural gas prices. The citycouncil in a special meeting voted to immediately repeal theresidential natural gas section of an emergency utility tax thathas been imposed on consumers since 1952. The tax, which wasenacted due to reasons that no one in the city council cancurrently recall, varied from 0.5%, up to 4% over the last 46years.

Alaska Gov. Tony Knowles’ State of the State address last week centered on what could become the legacy of his administration: an 1,800-mile natural gas pipeline to transport the state’s 36 Tcf to the marketplace. With energy prices and energy consumption bursting at the seams, Knowles is dedicating the remainder of his term, which expires in 2003, to the gas project.

The shakeout in the battle between online energy tradingexchanges has begun, with rumors circulating that at least two ofthe well marketed, visible performers have run out of money and noware scrambling for customers and liquidity. Though no companieshave publicly announced plans to close or merge, insiders say it’sjust a matter of time.