FW: Energy Market Report

Energy Market Report
Wednesday, January 9, 2002

*See attached pdf file.
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Western Pre-Scheduled Firm Electricity Prices($/MWh)
January 9, 2002 for January 10, 2002

Peak(Heavy)
Low Change High Change
NW/N. Rockies 18.00 0.00 19.25 0.25
Mid-Columbia 18.00 0.00 19.25 0.25
COB 19.50 -0.50 20.50 -0.75
N. California 20.50 -1.75 22.50 -1.25
Midway/Sylmar NA NA NA NA
S. California 20.50 -0.75 22.75 -0.25
Mead 19.25 -1.75 21.50 -1.00
Palo Verde 19.00 -1.00 21.50 -0.50
Inland SW 19.00 -1.00 21.75 -0.75
4-Corners 19.00 -1.00 20.50 -1.00
Central Rockies 17.75 0.00 20.50 1.75
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Off-Peak(Light)
Low Change High Change
NW/N. Rockies 14.50 -0.50 15.75 -0.25
Mid-Columbia 14.50 -0.50 15.75 -0.25
COB 14.50 -2.00 16.00 -1.00
N. California 15.00 -1.50 17.00 -1.00
Midway/Sylmar NA NA NA NA
S. California 15.00 0.00 17.50 0.25
Mead 14.00 0.00 15.75 1.00
Palo Verde 12.50 -0.70 15.00 0.00
Inland SW 12.50 -0.70 15.75 0.75
4-Corners 13.00 0.00 14.25 0.25
Central Rockies 13.75 -0.50 15.50 0.00
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Crazy Caught in California

Peak power prices for Thursday delivery were mostly lower across the West
Wednesday on revised weather forecasts and lower spot gas prices. On
Tuesday, some forecasts were calling for Arctic air to descend upon northern
areas of the WSCC in the coming days, but on Wednesday most forecasts were
toting less severe warnings. "A day ago they were saying we would get hit
by a blast of Arctic air, and now they are saying we will get some cooler
air, but not of the Arctic variety," said one Northwest utility trader. The
revised forecasts also helped to lower balance-of-the-month contract costs
at all of the major Western hubs. "I was shocked that the dailies and the
balance traded lower today, we were expecting at least a little upside after
yesterday's session," said one surprised marketer. NYMEX Henry Hub gas
contracts settled lower Wednesday despite a supportive AGA inventory report,
largely due to concerns surrounding high storage levels. February and March
Hub gas contracts fell 5.3 cents each to settle at 2.228 and 2.232$/mmBtu,
respectively. Wednesday's AGA report indicated that 190 bcf were pulled out
of storage last week, well above industry estimates calling for a 175-bcf
draw. Total U.S. inventories stand at 2.666 tcf, 1.014 tcf, or 71 percent
of full. Of the 190-bcf drawn last week only seven were taken from the
Western Consuming Region. Total Western stocks stand at 407 bcf, or 81
percent of full. Western stocks were at 277 bcf on the same week last year,
and have averaged 313 bcf over the past five years. In news of the weird, a
recently fired employee of California nuclear power plant San Onofre (2,150
MW total) was arrested on Wednesday for making death threats against his
former boss and coworkers. Law enforcement investigators found over 200
guns, rifles, and munitions in his home and more when they searched a nearby
storage locker. Two officers were briefly hospitalized after inhaling an
unknown yellow gas released from a canister in the storage locker.
Officials said the arrest was not terrorist-related, and with the suspect in
custody no further threat was posed to the power plant.

Heavy load energy costs in the Northwest were steady to slightly higher on
Wednesday, to the surprise of many. On Tuesday, regional forecasts were
revised to reflect the anticipated arrival of Arctic air, which pushed the
dailies higher. Wednesday brought about another forecast revision, this
time in the opposite direction. While longer-term forecasts continued to
call for below-normal temperatures for much of the region, the extent of the
cooling was not expected to be as severe as previously anticipated. Flow
forecasts for Chief Joseph were revised slightly lower on Wednesday, coming
in at 75 kcfs through Friday, 65 kcfs Saturday, 55 kcfs Sunday, 90 kcfs
Monday, and 85 kcfs next Tuesday and Wednesday. The lower flows partly
reflected the return of cooler temperatures, which have curtailed recent
snowmelt, reducing side flows in turn. On the topic of water, the Northwest
River Forecast Center slightly lowered its runoff forecast for this year at
some of the region's large Columbia River Dams. Nonetheless, it appeared
likely that the Northwest would still have much healthier water levels in
2002 compared to last year's "drought-like" conditions. April through
September supplies at Grand Coulee were forecast to be 94 percent of normal,
while The Dalles was expected to be about 93 percent of normal for the same
period. In unit news, Colstrip #4 (700 MW) tripped late Tuesday or early
Wednesday due to a suspected tube leak, and was reportedly given a 48-hour
turnaround time.

Day-ahead electricity prices were mostly lower in California on Wednesday
amid warmer weather for much of the state. NP15 and SP15 traded almost flat
to each other, while COB traded about two dollars lower. Balance of January
at NP15 slipped with the rest of the West on Wednesday, trading between 20.5
and 22.5$/MWh and losing its premium over the day-ahead prices. In
political news, the CPUC said they wanted more input in the PG&E
reorganization proposal. Specifically, the commission thinks parent PG&E
Corp. should be required to invest a more substantial stake in the repayment
process. The FERC judge who originally ruled in favor of El Paso Corp.
officially reopened the anti-competitive case against the energy firm,
saying new evidence could make him change his recommendation. The company
was accused of withholding transmission on its natural gas pipelines into
California during last year's energy crisis. In unit news, Moss Landing #6
(739 MW) was operating at 300 MW on Wednesday for planned reasons. There
was talk that one of the two Intermountain units (820 each) was coming off
this weekend for annual maintenance, while other sources said it wasn't
exiting the grid until early February, but no official word was available as
of this writing. Above-normal temperatures were expected to continue on
Thursday, with forecasts calling for highs in the mid-50s to mid-60s at
mid-state load centers, and in the low-70s in the south. Highs in the Bay
area were expected to drop about ten degrees on Friday, but otherwise little
change was expected in the Golden State through Sunday. The most current
six-to-ten predicted below-normal temperatures from January 15 to 19.

It was a buyers market in the Southwest on Wednesday, with several players
reporting that sellers were coming out of the woodwork. "We tried to sell
early, but everyone told us to call back if we needed any power. Later on
we did call some people back because prices fell below the marginal costs of
some of our less-efficient units," said one Arizona-based trader. Daytime
highs in Phoenix hit 81 degrees on Tuesday, while overnight lows were
hovering mainly in the 50s. Utilities were still seeing loads pick up in
the late evening and early morning hours, but the patterns were said to be
more reminiscent of spring than winter. In unit news, Four Corners #5 (750
MW) was still operating at 550 MW on Wednesday due to an air preheater
problem. The New-Mexico based unit was scheduled to come down for annual
maintenance on January 15, and not return until March 14. Weather forecasts
called for above-normal temperatures though the week in the region's major
load centers, while the latest six-to-ten from the NWS was prediction normal
temperatures from January 15 through 19.

Patrick O'Neill and Jessie Norris
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Western Generating Unit Outages

Current Begins Ends Reason
CAISO units <250/6405 total NA NA
planned/unplanned*
Alamitos #3/320/gas 04-Dec-01 ? planned
Alamitos #4/320/gas 04-Jan-02 ? planned
Colstrip #4/700/coal 09-Jan-02 ? unplanned*
Coronado #1/365/coal 22-Dec-01 09-Jan-02 main
transformer*
Etiwanda #3/320/gas 22-Dec-01 ? planned
Grand Coulee #19/600/hydro 10-Dec-01 March repairs
Haynes #6/341/gas 07-Jan-02 ? planned
Helms PGP #2/407/hydro 01-Oct-01 ? planned
Hyatt/Thermalito/933/hydro 02-Oct-01 ? @607 MW,
unplanned
Morro Bay #3/337/gas 04-Jan-02 ? planned
Moss Landing #6/739/gas 09-Jan-02 ? @300 MW, planned*
Moss Landing #7/739/gas 29-Dec-01 ? planned
Ormond Beach #1/725/gas 28-Dec-01 ? planned
Ormond Beach #2/750/gas 05-Oct-01 ? @350 MW,
unplanned
Pittsburg #6/317/gas 22-Nov-01 ? planned
Pittsburg #7/682/gas 03-Jan-02 ? unplanned
Redondo #8/480/gas 09-Dec-01 ? planned

Future
Four Corners #4 15-Jan-02 14-Mar-02
maintenance*

For unit owners refer to pdf version.
*Indicates a change from previous EMR.
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Eastern Markets Pre-Scheduled Firm Power Prices ($/MWh)

January 9, 2002 for January 10, 2002

Peak (Heavy) in $/MWh
Low Change High Change
Into Cinergy 18.50 -1.05 20.50 -0.75
Western PJM 22.50 -1.70 23.50 -1.35
Into Entergy 19.00 0.00 23.00 3.00
Into TVA 19.50 -0.75 20.50 -1.25
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Amid above-normal temperatures, the expectation of further warming on
Thursday, and softer natural gas prices, heavy load electricity prices
slipped across the Eastern Interconnect on Wednesday. "The weather outlook
is bearish right now, and gas dropped about 8 or 9 cents pretty much across
the board, so February fell off and the dailies took a hit as well," said
one Midwestern trader. The AGA storage report listed a bullish withdrawal
of 190 bcf, mostly from the Eastern Consuming Region. Despite the
supportive AGA, NYMEX Henry Hub natural gas futures fell on Wednesday.
February lost 5.3 cents to close at 2.228$/mmBtu, while March also fell 5.3
cents to end at 2.232$/mmBtu.

Forecasts for warming temperatures were the main culprits bringing PJM
day-ahead power prices lower on Wednesday, despite strong real-time prices
for much of the morning and a key coal unit outage. Pennsylvania-based
Homer City #1 (620 MW) reportedly came off-line late Tuesday with a header
crack, and was expected to remain down until February 6. Sources also said
coal-fired Conemaugh #2 (850 MW) was out of service on Wednesday, although
no official confirmation was available. Western PJM goods changed hands
between 22.5 and 23.6$/MWh, down over a dollar to a day ago. February was
heard trading between 25 and 25.5$/MWh, down at least fifty cents, mostly on
weaker gas and warmer weather. LMPs averaged 32.4$/MWh through 14:00 EST,
after plateauing above 70$/MWh for almost an hour starting at 09:40 EST.
Temperatures were expected to reach highs in the 50s on Thursday, with lows
in the 38 to 41 degree range. The latest six-to-ten from the NWS called for
normal temperatures from January 15 to 19.

Peak power prices weakened in the Midwest again on Wednesday, dragged down
by the same factors affecting the rest of the Eastern electricity market;
namely warmer weather and weaker gas. Into Cinergy pieces for Thursday
delivery slipped about a buck, trading between 18.4 and 20.5$/MWh. "Dailies
were low for most of the day, but cracked into the 20s late, which is a
typical trading pattern," remarked one Cinergy player. February also edged
down about 75 cents, with deals heard between 21.5 and 21.75$/MWh. Weather
conditions were predicted to be mild on Thursday, with high temperatures in
the mid-40s and lows in the upper-30s. The most current six-to-ten called
for normal temperatures from January 15 to 19.

Warm weather, weak demand, and soft gas placed downward pressure on the
Southeastern electricity market Wednesday, but the Entergy dailies ended
higher anyway, with some shorts bidding prices up late. Into Entergy goods
were bought and sold between 18.75 and 23$/MWh, while Into TVA deals were
done from 19.25 to 20.25$/MWh. In political news, the PJM Interconnection
applied to become the operator of the proposed SeTrans RTO in the
Southeastern U.S. on Wednesday. High temperatures were expected to rise
into the low-60s on Thursday, before dropping back into the 50s for the rest
of the week. The most current six-to-ten predicted normal temperatures from
January 15 to 19.
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California ISO Congestion Index in $/MWh

Path Peak Off-peak
for 10-Jan-02 NW1 to NP15 3.13 0.00
NW3 to SP15 0.00 0.00
AZ3 to SP15 0.00 0.00
LC1 to SP15 0.00 0.00
SP15 to NP15 0.00 0.00

OTC Forward Peak Electricity Contracts in $/MWh

Mid-C PV SP-15
Bid Ask Bid Ask Bid Ask
BOM 19.50 20.50 21.50 22.50 23.00 24.00
February 18.75 20.25 22.25 23.25 23.25 24.25
March 17.00 18.50 21.50 22.50 23.00 24.00
April 17.00 18.50 23.50 24.50 23.25 24.25
Q2 '02 16.50 18.00 26.00 27.00 26.00 27.00
Q3 '02 30.00 31.50 39.75 40.75 38.25 39.25
Q4 '02 25.00 26.50 26.00 27.00 28.00 29.00
Q1 '03 25.00 26.50 25.50 26.50 28.00 29.00
Cal '03 25.25 26.75 30.00 31.00 32.00 33.00

Represents the most recent bid/ask spread obtainable
by the Energy Market Report.

Alberta Power Pool Index (C$/MWh)

Peak(14) Peak(16) Off-Peak Flat Change
for 08-Jan-02 40.46 38.04 14.72 31.05 5.54

BPA's Offer for 01/11/02 and 01/12/02.

Hours Amount NW delivered COB/NOB delivered

7-22 100MW Market Price* Market Price*

*Market price will be determined at time of request.

NYMEX Henry Hub Gas Futures in $/mmBtu

Close Change
Feb 2.228 -0.053
Mar 2.232 -0.053

Natural Gas Spot Prices in $/mmBtu

Low High
Sumas 1.97 2.02
So. Cal Border 2.13 2.18
San Juan 1.97 2.02
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Economic Insight, Inc. - 3004 SW First, Portland, Oregon 97201,
Telephone (503) 222-2425, Internet e-mail emr@econ.com -
Copyright, Economic Insight, Inc. 2002.