Wednesday, December 28, 2005

Dynegy pulls out of California

At least one energy company has decided that the costs and risks of doing business in California were too high and is leaving the Golden State.

Dynegy Inc. DYN today announced that it has entered into an agreement with NRG Energy, Inc. NRG through which the companies will each simultaneously purchase the others' interest in two jointly held entities that own power generation facilities in Illinois and California, respectively.

Under the terms of the purchase and sale agreement for the Illinois interests, Dynegy will acquire NRG's 50 percent ownership stake in the jointly held entity that owns the Rocky Road power plant, a 330-megawatt natural gas-fired peaking facility near Chicago. Pursuant to the purchase and sale agreement for the California interests, Dynegy will sell its 50 percent stake in WCP (Generation) Holdings LLC, a joint venture between Dynegy and NRG with ownership in power plants totaling approximately 1,800 megawatts in southern California, to NRG. As a result of the two transactions, Dynegy will also receive net cash proceeds of $160 million from NRG, subject to certain purchase price adjustments at closing.

Hurricanes, Global Demand to blame for high gas prices

2005 saw gasoline prices hit historic highs. Mother nature and economics, not corporate profiteering, were to blame.

Check the prices at your nearest gas station and you may be tempted to think August and September of 2005 were just bad dreams.

The record-high gasoline prices that stunned Americans in the aftermath of summer's Gulf Coast hurricanes are gone. A gallon of regular, worth more than $3 mere months ago, now costs about $2.23 throughout California. That's only a little more than the $2.05 of one year ago.

But don't expect the relief to last. Energy analysts consider the current low prices an aberration, destined to disappear.

The plunge in gas prices represents a strange goodbye gift from hurricanes Katrina and Rita. After the storms smashed Gulf of Mexico oil wells and flooded coastal refineries, gasoline imports to the United States surged. We're still working through the glut. It will probably vanish in the new year.

Sooner or later, gasoline prices will probably rise to reflect the cost of crude oil, which stayed high after the hurricanes. Even the federal government, considered too optimistic by some analysts, expects oil prices to stay high or rise in 2006.

That doesn't mean a quick return of $3 gas. It does probably mean rising prices at the pump. The federal Energy Information Administration predicts a national average price of $2.41 for regular next year.

Thursday, December 22, 2005

Senate rejects domestic oil exploration

Never again believe a U.S. Senator who tells you they want to reduce America's dependence on foreign oil. They can talk the talk, but don't walk the walk.

The Senate rejected an effort to open the Arctic National Wildlife Refuge to oil drilling Wednesday after lawmakers balked at a controversial move to pass drilling as part of a popular defense spending bill that pays for the war in Iraq and Hurricane Katrina relief.

Republican leaders failed to rally the 60 votes needed to override a filibuster, falling four votes short. The vote was a defeat for the White House and GOP leaders, who failed for a fifth consecutive year to boost domestic energy supplies by opening the refuge on Alaska's north coast.

Customers may pay for Calpine failure

California utility customers could end up footing the bill for the bankruptcy of Calpine.

The bankruptcy filing by the state's largest independent electricity generator, Calpine Corp., could lead to higher monthly bills for many ratepayers but is unlikely to result in blackouts next summer, energy regulators and analysts said Wednesday.

As the San Jose-based company seeks protection from creditors and considers selling assets, it is unlikely to shut down the bulk of its 41 generating plants in California, which contribute a steady flow of about 3,000 to 5,000 megawatts of electricity to the state grid, analysts said.

Wednesday, December 21, 2005

SCE customers to see rate increases

Electric cusomers in Southern California will get an unpleasant surprise when their heating (or given the weather lately, air conditioning) bills come due.

Electricity rates for more than two-thirds of Southern California Edison's customers will rise as much as 18% in the new year, the company said Tuesday.

With winter starting today, the utility's 4.6 million residential and commercial customers can expect three increases in coming months. The company, a unit of Edison International in Rosemead, said soaring prices for natural gas, which fuels most of the state's power plants, were the main culprit.

Calpine on verge of collapse

It has been five years since California's power crisis, but it's still claiming its victims.

Californians who suffered through the power emergency at the beginning of the decade probably aren't inclined to use the word "tragedy'' now that one of the big electricity suppliers that made fortunes during the crisis faces ruin.

But that's a word that crops up when veterans of the state's energy wars speak of the near-collapse of independent power generator Calpine Corp., a company that soared during the energy crisis and filed for bankruptcy late Tuesday.

"It's a very sad story,'' said Mike Florio, senior staff attorney at The Utility Reform Network, a San Francisco consumer advocacy organization that fiercely denounced companies that took advantage of California's flawed energy deregulation plan in 2000 and 2001 to reap record profits.

As California agonized through blackouts and skyrocketing electricity bills, San Jose's Calpine carried out an ambitious program to build power plants. It based its sweeping construction program on efficient technology that squeezed the most power out of natural gas, the cleanest-burning fuel available.

The Sierra Club endorsed one of its plant proposals. Former Gov. Gray Davis hailed Calpine as the state's rescuer. Its founder, Peter Cartwright, is still called a visionary by a top state energy official.

To finance its aggressive building program, Calpine used a high-risk strategy, borrowing billions of dollars, largely from the bond market. Company officials expected that growing demand for electricity would provide plenty of cash to repay those obligations.

Today, Calpine is going broke, crushed by this heavy debt burden plus the high price of natural gas. The company lost $683.9 million in the first three quarters this year on revenue of $7.5 billion.

Tuesday, December 20, 2005

Natual Gas Imports may constrain prices

By creating the infrastructure to import natural gas from foreign countries, the U.S. may be able to keep natural gas prices in check.

Consumers facing high home heating bills due to natural gas prices that last week reached a record might wish Frederick were even busier. Once global gas trading becomes more commonplace, U.S. natural gas prices should sink.

"As we're able to bring more supply into this country ... prices will, in fact, be lower," says Stacy Nieuwoudt, an analyst at Pickering Energy Partners in Houston.

As the gap widens between surging demand for natural gas and plateauing production from domestic wells, the scene at Cove Point will be repeated around the USA. Imports of liquefied natural gas, or LNG, are expected to rise from about 1% of total gas usage in 2002 to 15% by 2015 and 21% by 2025, according to the Energy Information Administration (EIA). That year, total imports are expected to be almost seven times the current figure.

Energy companies have submitted dozens of proposals for new terminals along all three U.S. coastlines to receive the expected shipments, which will give the United States greater flexibility in meeting its energy needs. Dominion is awaiting government approval to almost double Cove Point's capacity by 2008.

Thursday, December 15, 2005

Consumers substitute energy with soaring prices

Pollution-generating firewood is surging in sales departments, as consumers go old-school to heat their homes. Air quality watchdogs are not pleased.

The hottest item for Christmas this year might not be a trendy video game or high-tech digital camera, but a stack of firewood. That's right. Dead trees are in.

High natural-gas prices this fall have ignited demand for wood in a way not seen in years, as a growing number of Northern Californians are attempting to save money on their PG&E bills by turning to their fireplaces instead of thermostats for heat.

Many Bay Area firewood dealers say supplies of seasoned oak, pine and other firewood are running low. Some have already run out.

Meanwhile, the amount of firewood gathered in California's 18 national forests increased 71 percent this fall compared with last fall, the Forest Service reports.

And nationally, sales of wood stoves are up significantly this year, while sales of many types of natural-gas burning stoves and fireplace inserts are down.

``We may run short of wood this year, only the second time since we've been in business,'' said Robert Bahara, whose family has owned Bahara's Farmer's Outlet, a Sunnyvale firewood dealer, since 1954.

But one group isn't full of cheer about the trend: air pollution regulators.
Officials at the Bay Area Air Quality Management District note that soot from burning wood, or ``particulate matter,'' is a health hazard. During cold nights with no wind or rain, smoke from wood fires can stagnate over neighborhoods, aggravating breathing problems for people with asthma, the elderly and children.

Wednesday, December 14, 2005

DWP expedites push for Green Power

Los Angeles' Department of Water and Power is speeding up its adoption of environmentally-friendly power.

The Los Angeles Department of Water and Power can generate 20% of its electricity from renewable sources by 2010, or seven years earlier than planned, but it will likely result in heftier bills, the agency said Tuesday.

DWP board members said any increase is likely to be about $1 per month for the average homeowner, a rise that member H. David Nahai characterized as "affordable."

As a result, the panel reached a consensus during a workshop Tuesday to move the deadline up to 2010. A vote to adopt that deadline as policy will be held at the board's meeting next Tuesday.

Former Mayor James K. Hahn proposed that the city increase green power in its energy portfolio from 3% to 20% by 2017.

Tuesday, December 13, 2005

High Oil Prices here to stay

Here is a shocker...don't expect oil prices to drop much further anytime soon.

OPEC ministers and the U.S. Energy Department delivered a chilling message to consumers Monday: High energy costs are here to stay.

At a meeting in Kuwait, members of the Organization of the Petroleum Exporting Countries hinted at possible production cuts next year — a move that would boost oil prices. Federal energy forecasters, meanwhile, issued revised projections showing sharply higher crude prices extending until at least 2014.

Could a warning on Natural Gas prices be next?

Solar Plan finds new life

Governor Schwarzenegger's plan to expand solar energy in California has gotten a fresh breath of new life:

State energy officials, seeking to revive a key element of the Schwarzenegger administration's push to expand renewable energy use, on Monday outlined a plan to increase annual spending on new solar energy units to nearly $300 million.

The plan, set for formal release today, would shuffle programs among state agencies in order to revive the administration's high-profile program to build 1 million homes with units to make electricity from the sun.

That initiative died in the Legislature this year after the administration balked at union wage guarantees sought by Democrats. The new solar push aims to bypass the Legislature by tapping the state Public Utilities Commission's authority to collect money from electricity customers and spend it to boost subsidies to homes and businesses that install solar units.

Personally, I am partial to Assemblyman Richman's proposal which would have covered the California Aqueduct with solar panels instead...alas, the Dems wouldn't even give that one a hearing!

Monday, December 12, 2005

Schwarzenegger's many positions on coal

Environmentalist Santa Claus may be leaving a lump of coal for the Governor...or maybe not. The future is uncertain.

Gov. Arnold Schwarzenegger, the environmentalist, hates the pollution caused when coal is burned to make electricity.

But Schwarzenegger, the businessman, likes the low-cost, plentiful electrons produced by coal-fired generators from Wyoming to Nevada.

Over the last year, the governor has enthusiastically embraced both positions, issuing seemingly contradictory executive decrees, legal agreements and statements. Now he's getting pressure from pro- and anti-coal factions in his administration and across the West to reconcile his stances. All the vying parties hope to influence energy policy in California, the region's biggest electricity market.

The governor, like others in the state, has a split personality on coal, said Gary Ackerman, executive director of the Western Power Trading Forum, an industry group for electricity sellers. "They want the cheap power and they also want renewables" such as wind and solar energy, which are more expensive.

The Schwarzenegger administration's mixed message on whether to support Western coal has at varying times worried and buoyed environmentalists, California businesses and officials in coal-rich neighboring states. All have hefty stakes in what the governor decides.

Friday, December 09, 2005

State Agencies: NO LNG in the LB

Three State Agencies expressed consternation over plans to build a liquefied natural gas facility in downtown Long Beach.

Three of California's most powerful regulatory agencies filed sweeping indictments Thursday of how the Bush administration reached its conclusion that the proposed Long Beach liquefied natural gas terminal would be safe.

On the last day for comment on the project's draft environmental report, the three agencies raised fundamental questions about the safety of building terminals to handle highly flammable liquid gas in populated areas, such as Long Beach, where 130,000 people would live and work within three miles of the site. Two of the agencies called for the report to be rewritten.

"When human error alone makes this risk too large in light of how many people would be in harm's way," the state Public Utilities Commission said in its response, "the added risks of earthquakes or terrorist attacks make this site one of the worst possible sites imaginable."

Indeed some offshore sites seem a better choice should, god forbid, the worst case scenario ever happen.

Chevron to focus on exploration

There are two ways to solve the supply and demand problems in American oil markets--price customers out of the market or drill for more oil. Chevron decided to do the latter.

Chevron Corp. said Thursday that it will boost capital spending by 35 percent to $14.8 billion next year. The money will fund exploration, production and refining, the key elements to increasing the future supply of oil and gas.

Dave O'Reilly, chairman and CEO of the San Ramon company, said in a statement that the size of the expenditures "reflects a strong queue of growth projects, many of which are entering their construction phase and demonstrates our commitment to bring new energy supplies to market."

About two-thirds of the money will be spent overseas, with $4.9 billion earmarked for the United States.

Thursday, December 08, 2005

Long Beach LNG: Not so Fast!

Early reports of the success of the LNG facility in Long Beach were premature.

A study of a proposal to build a liquefied natural gas terminal at the Port of Long Beach falls short of answering some key questions, such as whether the terminal would be vulnerable to terrorists, prone to accidents or costly for local agencies, Long Beach city officials said Wednesday.

Long Beach city leaders have said they will await a final environment impact report on the controversial proposal before deciding whether to approve it.

However, on Wednesday, in response to a request for comments, the city released a strongly worded critique of the draft version of that report.

The city said the draft neglects some worrisome possibilities of the proposal, such as the chance that terrorists could commandeer a tanker ship full of liquid natural gas, or that gas could be released in a pipeline accident. Nor does the draft sufficiently consider the danger to port workers in the event of an explosion, city officials said.

The city said the police and fire departments might have to buy equipment or retrain employees to prepare for possible accidents or attacks on the facility. The draft study neither spells out these costs nor says who would pay for them, the city said.

Calpine battles to avoid Bankruptcy

The 200-01 California Energy Crisis is still taking its victims as Calpine endures a slow, painful death.

Calpine Corp. struggled to avoid a forced bankruptcy filing Wednesday, sparring in a flurry of court actions with bondholder trustees who threatened to declare the San Jose energy firm in default on $3 billion in debt if it did not restore $312 million to an escrow account by day's end.

The company appealed to a Delaware judge for a temporary restraining order preventing Wilmington Trust Co., the bondholders' representative, from moving for immediate repayment. A default on these securities, Calpine said in court papers, could "irreversibly damage Calpine's already precarious financial situation and immeasurably injure Calpine's other stake holders."

"Such a declaration could trigger cross defaults on other Calpine debt," Calpine said in its motion for a restraining order, obtained by the Associated Press. (Bond contracts often require the debtor to be making timely payments on its other obligations.) "Calpine will be unable to calm roiled markets, address the company's continuing cash-flow demands and generate the additional cash necessary to redeposit the restoration amount."

Friday, December 02, 2005

Winter heating bills not so bad

Good news for consumers when it comes to energy prices, for once!

Winter heating bills won't sock people quite as hard as feared this month because mild weather so far has driven down prices for natural gas.

Bills will probably rise 25 percent this month from a year ago, Pacific Gas & Electric announced Thursday. That's still stiff, but not as severe as the 38 percent the utility had forecast. And it's a relief from the 70 percent hike seen in October and 50 percent in November.

The increase in gas bills has steadily slackened since Hurricanes Rita and Katrina severely battered natural gas production along the Gulf Coast. Natural gas is used to fuel furnaces and hot water heaters in most households.

Electricity Imports Hurt Environment

Because of regulations in California, many companies (including Los Angeles' Department of Water and Power) have chosen to locate their electric generation outside of the State. To little surprise, this isn't such a great deal for the environment.

California increased its dependence on polluting, coal-fired power plants during the past decade while renewable energy use remained stagnant, according to three environmental groups that released a report Thursday highlighting what one clean-air advocate described as "California's dirty little secret.''

About 20 percent of the state's electricity needs are met by importing electricity produced in other Western states by power plants that would not meet air pollution standards here, according to the report.

That power use has measurable effects on the environment in states like Arizona and Nevada, the report says, noting that California's share of coal-burning plants accounts for more than 200 times the amount of mercury produced by all of the state's natural gas plants, and that the plants release 67 million tons of carbon dioxide annually into the air -- the equivalent of 11 million cars.