Subject: California Gas Prices - Market Intelligence
From: [email-masked]
To: [email-masked]
Cc: [email-masked]
Date: Thu, 30 Nov 2000 05:54:00 -0800 (PST)

Below are some notes taken while conversing with several TW customers on the 
various reasons prices have risen so dramatically out West.

El Paso line 1103 is still out of service from the August 2000 explosion.  
The remaining 2 lines are still operating at reduced flow levels taking 
200-300,000/d capacity off the market.

Storage levels in California were low to begin with.  With several coal and 
nuclear generation plants off-line (unplanned outages), the gas-burning 
generators have been running all out.

Northwest Pipeline has instituted several OFO's this month requiring shippers 
not to overpull the pipeline.  Penalty gas was selling for $22.00/MMBtu.

Beginning in November, SoCal Gas instituted its 5-day balancing requirement.  
This was not an unplanned event in the marketplace, however, it seems several 
entities were caught short early in the month and still haven't caught up.

LDC's east of California have experienced some dramatic weather but not 
severe.  They have been impacted more by firm demand to California knocking 
off IT and Alternate Firm supply destined for points east of California.  
SouthWest Gas has several alternate supply contracts with these LDC's and is 
collecting 150% of the market price from these LDC's by using SWG's full 
requirements contract on El Paso.

In addition, we now believe SoCal Gas is playing some storage games with the 
interstate pipes.  SoCal lowered their window on us for tomorrow to 580,000 
down from 750,000 due to "lower projected gas demand".  Sempra, Reliant, 
Dynegy, and Texaco are calling foul.  The thought is SoCal demand may be 
falling but instead of taking excess gas to replenish storage, SoCal is 
preventing higher-priced gas from reaching storage.