E&GT Briefs

FAME releases data from New York & PJM ISOs

Fame Information Services Inc., provider of historical and reference data management solutions for the financial, energy and public sector markets, has expanded its coverage of energy market data with the release of data from both the New York and PJM ISOs. FAME now has more than 55 quality checked sources of energy market data.

Edison Mission Marketing & Trading selects OpenLink

Edison Mission Marketing & Trading (EMMT), Boston, provider of trading, risk management and operations software, has licensed Endur for the front- to back-office administration of power transactions, as well as natural gas and coal procurements for their parent company’s (Edison Mission Energy) generation assets. In addition, EMMT has licensed pMotion, OpenLink’s integrated power scheduling product that provides marketers and schedulers the tools needed to manage the book-out and physical delivery of power transactions.

ISO New England launches redesigned power market

ISO New England Inc. opened its redesigned wholesale power market in early March. The new method for buying and selling wholesale power is called Standard Market Design (SMD). SMD was a 22-month development effort that included developing computer systems and business processes, software testing and certification from an independent software auditor, and several market trial simulations. SMD features two core components: locational marginal pricing and a multi-settlement system. Wholesale power will no longer be priced uniformly across New England. As of March 1, the cost of transmission congestion was priced at a market rate, based on the location where the congestion occurred. Eight pricing zones went into effect on March 1, one for each of the following states: Connecticut, Maine, New Hampshire, Rhode Island, and Vermont; and three pricing zones for Massachusetts—one western and central Massachusetts, one for northeastern Massachusetts and Greater Boston, and one for southeastern Massachusetts and Cape Cod.

UGI Corp. to buy TXU Energy’s NE U.S. gas marketing business

UGI Corp. announced that its energy marketing subsidiary, UGI Energy Services Inc., has agreed to acquire the gas marketing business of TXU Energy serving the northeast region of the U.S. The transaction follows similar but smaller acquisitions by UGI over the past three years that included all or portions of the energy marketing businesses of Columbia Energy, Conectiv and PG Energy in the same region. Results of the TXU Energy acquisition are expected to be modestly accretive to earnings in the first full year of operation.

Reliant Resources exits proprietary trading

Reliant Resources announced that as a result of the extreme volatility in natural gas prices in late February, the company incurred a significant trading loss. As a result, management made the decision to exit proprietary trading activities. Starting in late December 2002, the company’s financial gas trading desk carried a spread position, which involved a short position for March natural gas deliveries and a long position for April natural gas deliveries. The position was within the company’s authorized Value at Risk and positional limits. However, natural gas market conditions changed dramatically over the weekend of Feb. 22-23, with the NYMEX March contract increasing $2.53/MMBtu on Monday, Feb. 24 from the previous Friday’s closing price. The company closed these positions, resulting in a trading loss of approximately $80 million pre-tax.

Dynegy exits communications

Dynegy Inc. announced an agreement to sell its North American communications business to an affiliate of 360networks Corp., a provider of data telecommunications services. The transaction is expected to close in April 2003. “Today’s announcement is significant for Dynegy and its stakeholders as it represents the last major divestiture of non-core assets in our self-restructuring. It leaves us with our three strong energy businesses in power generation, natural gas liquids and regulated energy delivery,” said Dynegy Inc. president and CEO, Bruce A. Williamson.

Alaska North Slope Gas producers discuss pipeline project

Exxon Mobil Corp., BP, and ConocoPhillips met with Alaska Gov. Frank Murkowski in late March to discuss plans for entering into negotiations regarding state fiscal certainty, as well as ways to reduce project cost and improve project viability for the proposed $20 billion Alaska Gas Pipeline project. This project would involve a pipeline system to deliver gas from Alaska’s North Slope to the Lower-48 states. The meeting followed a unanimous vote by the Alaska House of Representatives for passage of House Bill 16, the reauthorization of the Alaska Stranded Gas Development Act. This bill, once signed into law, will allow the producers and the state to enter into negotiations regarding fiscal certainty and clarity for the Alaska Gas Pipeline project. The bill now moves to the Alaska State Senate.

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E&GT Briefs

Intercontinental announces formation of 10x Group

IntercontinentalExchange (Intercontinental), a global electronic commodity trading platform, announced the formation of the 10x Group, a market data services company with offices in Houston and London. The 10x group has been established to address the commodity industry’s need for verifiable, transparent and timely market data, according to the company. The company will operate autonomously from Intercontinental, with third-party market news and commentary. Martin Wadhwani, previously the head of Reuters’ Commodity and Energy Information Group, will lead the 10x Group.

S&P releases gas industry report card

Among the key issues that determine credit quality in the global oil and gas industry are merger and acquisition activity, sovereign risk, and pricing assumptions, according to a report released by Standard & Poor’s (S&P) Rating Services. The comprehensive report covers each sector of the industry, including exploration and production, refining and marketing, oilfield services, and contract drilling. “Industry Report Card: Global Oil and Gas,” is available on RatingsDirect, Standard & Poor’s Web-based credit research and analysis system, or at their public Web site at www.standardandpoors.com.

AEP axes traders, downsizes

According to news reports, shares of American Electric Power (AEP) plummeted in October after the company stated it would fire five traders for providing “inaccurate price information” to trade media for use in indexes. AEP executive vice president Eric van der Walde stated, “We did not approve, and we do not condone, this sort of activity.”

AEP also stated plans to reduce its exposure to speculative energy trading markets by downsizing its trading and wholesale marketing operation. The company did not provide headcount numbers in their statement. AEP president, chairman, and CEO E. Linn Draper did state that “this decision doesn’t reflect a lack of confidence in the competence or integrity of our trading operations. We do expect a reduction in the number of employees in that business, but I anticipate that many will remain with the company.”

El Paso says FERC ruling sets dangerous precedent

El Paso Corp., a natural gas pipeline company, told federal regulators a ruling that an El Paso pipeline deliberately withheld supplies during the California energy crisis sets a dangerous precedent for all U.S. pipelines. El Paso said the ruling last month by an administrative law judge ignored “overwhelming evidence” that El Paso made as much pipeline capacity available to shippers as it safely could. It also claims that the judge’s ruling wrongly interferes with each company’s right to determine how much natural gas pipeline pressure is safe. California claims that its utilities were overcharged by as much as $3.3 billion for natural gas to fuel their plants because of El Paso’s actions. FERC Judge Curtis Wagner ruled that El Paso wrongly capped shipments at just 79 percent of capacity between November 2000 and March 2001, a period when California was reeling from blackouts. Houston-based El Paso formally challenged the decision in documents submitted to the four political appointees on the Federal Energy Regulatory Commission. El Paso has mounted an aggressive campaign since the FERC judge’s decision last month, which sent its shares plunging to a 10-year low and wiped out about $4 billion in market capitalization. The company bought a full-page advertisement in the Washington Post and has lobbied lawmakers to help it fight the decision. El Paso is also demanding that FERC’s commissioners hold a rare session in late November to hear legal arguments challenging the ruling. (Under FERC rules, the commissioners can accept, reject or modify an administrative judge’s initial ruling.)

Aquila to cut another 200 jobs by end of year

Aquila Inc. plans to cut about 200 more jobs by the end of the year as the utility moves away from energy dealing, said CEO Richard Green Jr. With those cuts and others, the company said it will have shed nearly 25 percent of its work force by the end of the year. The company began the year with about 7,300 employees. So far, 1,015 employees have been laid off and another 580 have left voluntarily or work for companies that Aquila sold to raise money. Green also said that Aquila will end up selling more than $1 billion in assets, which will reduce debt, but at a cost. He said the company would have a $127 million loss on the deals.

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