NGI The Weekly Gas Market Report

Morgan Stanley Capital Group Inc., a power marketer, is seekingan emergency cease and desist order directing the California ISO’sgoverning board to overturn its decision reducing the power pricecap to $500/MWh and to restore the temporary $750 cap. It furtherhas asked FERC to stay the ISO’s price-cap authority, and to stripit entirely of that power when an existing resolution expires inOctober.

EnronOnline embarked on a new e-commerce strategy last week thatinvolves alliances with independent energy trading platforms. Enronsigned memorandums of understanding with HoustonStreet.com andTrueQuote.com and anticipates signing deals with other platforms inthe near futures. The deals allow Enron to post its prices on theother platforms and to carry out North American natural gas andelectricity transactions through those other sites.

Energy industry giants, consumers and state energy policymakersmay all get their wishes fulfilled following a daylong “emergencysummit” last Wednesday in San Diego that was called to grapple withthe electricity supply and price crunch that has characterizedsummer 2000 in the southern end of California.

Sierra Pacific Resources announced that higher fuel and powercosts are expected to cause a dip in corporate earnings. Thecompany blamed it’s two Nevada utility subsidiaries, Nevada Power,and Sierra Pacific Power for the estimated $70-80 million in overbudget fuel expenses. “Similar to other electric utilities in theWest, we have confronted an unprecedented and extremely volatileenergy market over the last several months,” said Mark Ruelle,senior vice president for Sierra Pacific Resources. “As a result,we’ve been forced to pay significantly more for fuel and purchasedpower than we had budgeted at the same time that above-normaltemperatures increased the demand for electricity, particularly insouthern Nevada. “We expect fuel and purchased power expenses tohave a negative impact on second quarter earnings and an ongoingnegative earnings impact for the remainder of the year,” Ruelleadded.

Rather than “blaming just about everyone and everything” for thereliability problems on the electric transmission grid, SenateEnergy Chairman Frank Murkowski (R-AK) last week urged EnergySecretary Bill Richardson to take “immediate and meaningful action”to address the situation in the short term, while Congress tries towork out a longer term solution.

In a draft environment impact statement (EIS) released last week, FERC staff concluded the Guardian Pipeline would have “limited adverse environmental impact” and would be an acceptable action, with appropriate mitigating measures.

CanWest Gas Supply Inc., an old-line natural gas aggregator in British Columbia — and also the largest — has agreed to allow Atlanta’s Southern Company Energy Marketing to manage its business.

Denver-based Forest Oil Corp. has agreed to purchase another independent producer, Forcenergy Inc., for $615 million in stock, a move that is expected to significantly boost the new company’s operations in the Gulf of Mexico, Alaska and Canada.

In the wake of California’s latest round of electricity priceand supply shock concentrated in San Diego, some of the state’smajor energy industry participants have raised the level ofinterest in forward markets and hedging. San Diego Gas and ElectricCo., in particular, has been second guessed about why it did notuse available hedging instruments through the state’s nonprofitpower exchange to help ease the impact of recent wholesale pricespikes on its retail customers.