FW: Energy Market Report

Energy Market Report
Monday, January 7, 2002

*See attached pdf file.
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Western Pre-Scheduled Firm Electricity Prices($/MWh)
January 7, 2002 for January 8, 2002

Peak(Heavy)
Low Change High Change
NW/N. Rockies 17.00 -0.75 18.00 -2.00
Mid-Columbia 17.00 -0.75 18.00 -2.00
COB 19.00 0.25 19.75 -1.50
N. California 20.50 -2.00 22.00 -3.00
Midway/Sylmar NA NA NA NA
S. California 20.50 -1.50 22.50 -2.25
Mead 19.50 -3.00 21.50 -3.50
Palo Verde 18.75 -2.25 22.00 -3.00
Inland SW 18.75 -2.25 22.00 -3.00
4-Corners 17.50 -2.50 20.75 -3.00
Central Rockies 17.75 -3.75 18.50 -7.50
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Off-Peak(Light)
Low Change High Change
NW/N. Rockies 14.50 -1.25 15.25 -2.25
Mid-Columbia 14.50 -1.25 15.25 -2.25
COB 14.25 -1.75 16.00 -1.25
N. California 15.50 -1.75 17.25 -1.75
Midway/Sylmar NA NA NA NA
S. California 15.00 -2.25 17.00 -2.00
Mead 14.50 -3.50 15.75 -4.25
Palo Verde 14.00 -1.50 16.25 -2.25
Inland SW 14.00 -1.50 16.25 -3.75
4-Corners 13.50 -3.00 15.00 -3.00
Central Rockies 14.50 -3.50 16.00 -4.00
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On the Auction Block

Day-ahead peak power prices in the Western U.S. continued to fall Monday
against a backdrop of continued bearish fundamentals. While mild weather
for most of the WSCC provided much of the impetus for the daily decline,
lower spot gas prices and abundant Northwest hydro generation were also
lending a helping hand. "I don't know if prices can dip much below current
levels, but if the fundamentals hold their current course hydro could be on
the margin, and we could see some single digit prices," said one marketer.
Temperatures were forecast to remain at above-normal levels through the
week, with Weather Derivatives calling for heating demand in the WSCC to
average only 69 percent of normal through January 14, though some cooling
was expected next week. "Forecasts are calling for cooler weather in the
Northwest and California next week, but temperatures are not expected to
fall low enough to warrant any large increases in demand," said one
Oregon-based trader, who added, "And even if temperatures do fall
considerably, abundant hydro and cheap gas will likely keep any gains to a
minimum." On the political front, U.S. Treasury Secretary Paul O'Neill said
Sunday that his department was reviewing whether or not revisions in U.S.
regulations were necessary to protect investors after the collapse of
one-time energy giant Enron Corp. "I think the dust hasn't cleared yet on
this case and it is not clear whether the company fulfilled all of its
obligations under the existing rules," said O'Neill of the provisions that
allowed top Enron executives to sell shares while employees holding Enron
stock in retirement plans could not. "If they did [comply with U.S.
regulations], it suggests that we need rule change. If, on the contrary, it
turns out that they didn't fully comply with all the rules, we have a
different issue on our hands," O'Neill said on NBC. An auction of Enron's
trading arm was reportedly taking place Monday, though no details had been
released as of this writing. "We hear that there are more than the two
original suitors that will be bidding on Enron, which is good news for Enron
traders, but only the winning bid is supposed to be announced, so it may be
a while before we know all the entities that expressed interest in obtaining
the company," said one source.

Heavy load energy costs in the Northwest fell by as much as 2$/MWh on Monday
as mild weather cut into demand and abundant hydropower kept supplies
healthy. Light load goods fell by an average of 1.75$/MWh. "It was a quiet
day, with little load to speak of and oodles of available generation," said
one Northwest utility trader. There were some rumors that the 484 MW
gas-fired Klamath unit in Oregon came down Monday morning, but confirmation
was not available. "It wouldn't make a bit of difference anyway," said one
trader of the possible outage. Flow forecasts for Chief Joseph were
slightly lower than on Friday, despite recent rains, but remained healthy at
85 kcfs through Friday, 70 kcfs Saturday, 55 kcfs Sunday, and 85 kcfs next
Monday. Weather forecasts called for above-normal temperatures in Portland
and Seattle over the course of the week, while the latest six-to-ten from
the NWS was calling for below-normal temperatures across the entire region
from January 13 through 17. "The six-to-ten offered some longs a glimmer of
hope today, but it's too far off to rely upon, and the current over
abundance of hydro power would likely offset all but the most prolonged cold
snap," hypothesized one market pundit.

With little change in the warm temperatures projected through Friday and
plenty of supply flooding the electricity market, power prices settled lower
across the Golden State in quiet Monday trade. Players speculated on where
prices in the current bearish spot market would bottom out. However, with
no cold weather on the horizon, most players were pessimistic of a quick
turn-around. "Prices could conceivably fall to the cost of hydro. They
probably won't, but they could," commented one California trader. On-peak
goods at NP15 and SP15 traded mostly flat to each other, between 20.5 and
22.5$/MWh, while cheaper power at COB attracted a few buyers, with deals
heard between 19 and 19.75$/MWh. Light load transactions were heard mostly
in the 15 to 17$/MWh range. In generation news, Moss Landing #6 (739 MW)
was operating at 500 MW on Monday. The Duke unit was derated for planned
maintenance. Fellow gas-fired generator Haynes #6 (341 MW) was all the way
off-line for planned maintenance, with no official cause or ETR. However,
the rumor mill indicated the unit could be down possibly until the summer.
Weather doldrums were projected to continue at least through Friday, with
high temperatures expected in the mild mid-50s to upper-60s. The most
current six-to-ten called for below-normal temperatures along the coast and
in Northern California, with normal temperatures in the southern interior,
from January 13 to 17.

Unseasonably mild weather, lower spot gas prices and returning generation
were all cited as factors that led to a softer electricity market in the
Southwest on Monday. Peak power in the desert region fell by as much as
3.5$/MWh, while light load goods shed as much as 4.25$/MWh. On the unit
front, Four Corners #4 and #5 (750 MW each), San Juan #1 (350 MW), and
Mohave #2 (790 MW) were all back in service Monday morning following
unplanned outages that began last week. A six-to-ten-day forecast calling
for normal temperatures in Arizona and above-normal temperatures in New
Mexico from January 13 through 17 offered little hope for those looking for
a significant upswing in the market.

Patrick O'Neill and Jessie Norris
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Western Generating Unit Outages

Current Begins Ends Reason
CAISO units <250/6844 total NA NA
planned/unplanned*
Alamitos #3/320/gas 04-Dec-01 ? planned
Alamitos #4/320/gas 04-Jan-02 ? planned
Big Creek Project/1020/hydro 09-Dec-01 ? @752MW,
planned
Cholla #4/375/coal 01-Jan-02 ? unplanned
Coronado #1/365/coal 22-Dec-01 08-Jan-02 main
transformer
Etiwanda #3/320/gas 22-Dec-01 ? planned
Etiwanda #4/320/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 07-Jan-02 ? @500 MW,
planned*
Moss Landing #7/739 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

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 7, 2002 for January 8, 2002

Peak (Heavy) in $/MWh
Low Change High Change
Into Cinergy 20.50 1.50 22.00 -4.00
Western PJM 25.45 -0.80 26.25 -0.50
Into Entergy 19.00 2.00 25.00 2.50
Into TVA 21.00 -0.50 21.50 -4.00
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Amid forecasts for warmer temperatures as the week progresses and a healthy
generation landscape, day-ahead electricity prices mostly softened across
the Eastern Interconnect on Monday. Into Entergy was the exception,
rallying late when a large buyer entered the market. NYMEX Henry Hub
natural gas prices remained almost unchanged on Monday. The front-month
contract lost 0.3 cent to end at 2.272$/mmBtu, while March edged down a
nearly identical 0.4 cent to close at 2.261$/mmBtu.

Despite transmission work at several points on the Eastern Interface and
predictions of below-normal temperatures for Tuesday, peak power prices
floated lower in the Mid-Atlantic on Monday. Western PJM day-ahead goods
changed hands between 25.45 and 26.25$/MWh. Balance-of-the-week trades were
heard from 24.5 to 25$/MWh, off a little on forecasts for gradually warming
weather this week. "There needs to be some sustained cold weather to give
demand and prices a boost," said one PJM dealer. High temperatures were
expected in the upper-30s on Tuesday, before climbing into the upper-40s on
Wednesday and lingering there through Friday. The latest six-to-ten from
the NWS called for below-normal temperatures from January 13 to 17.

The story was the same in the Midwest, as weak demand and warmer forecasts
plagued the spot market, sending heavy load energy costs for Tuesday
delivery lower. Into Cinergy deals were done between 20.5 to 22$/MWh,
sliding 4$/MWh on the high end. No new outages were reported on Monday.
High temperatures were expected in the 35 to 40 degree range on Tuesday,
while the mercury was expected to climb even more by Wednesday, with highs
forecast to reach into the low-50s. The most current six-to-ten predicted
normal temperatures from January 13 to 17.

Peak power prices for Tuesday delivery posted mixed results in the Southeast
on Monday, as arbitrage between hubs sent the Entergy dailies higher and
left TVA unaffected. "Into Entergy prices were driven up late. I think
some of the bidders were buying in order to sell to Southern today, with
transmission not difficult to come by and that hub at a premium," explained
one trader. The heavy load product Into Entergy saw action from 19 to
25$/MWh, gaining 2$/MWh on the low end and 2.5$/MWh on the high. Into TVA
goods traded between 21 and 21.5$/MWh. Traders were also relieved to see
natural gas prices up, albeit incrementally, on Monday. Market player had
been worried on Friday that prices would fall again on Monday. Temperatures
were expected to rise into the mid-40s on Tuesday at most major load
centers, with further warming anticipated through Thursday, with highs
expected to reach the spring-like low-60s. The latest six-to-ten called for
normal conditions from January 13 to 17.
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California ISO Congestion Index in $/MWh

Path Peak Off-peak
for 06-Jan-02 NW1 to NP15 0.00 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

for 07-Jan-02 NW1 to NP15 0.00 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

for 08-Jan-02 NW1 to NP15 NA NA
NW3 to SP15 NA NA
AZ3 to SP15 NA NA
LC1 to SP15 NA NA
SP15 to NP15 NA NA

OTC Forward Peak Electricity Contracts in $/MWh

Mid-C PV SP-15
Bid Ask Bid Ask Bid Ask
BOM 19.75 21.25 22.75 23.75 24.00 25.00
February 19.00 20.50 22.75 23.75 24.25 25.25
March 16.50 18.00 22.75 23.75 23.50 24.50
April 16.50 18.00 24.00 25.00 23.00 24.00
Q2 '02 16.75 18.25 26.00 27.00 26.50 27.50
Q3 '02 30.00 31.50 39.75 40.75 38.50 39.50
Q4 '02 25.50 27.00 25.50 26.50 28.00 29.00
Q1 '03 25.25 26.75 26.00 27.00 28.50 29.50
Cal '03 25.00 26.50 30.50 31.50 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 04-Jan-02 34.08 33.55 17.45 28.64 -4.85
for 05-Jan-02 25.03 23.37 14.77 20.67 -7.97
for 06-Jan-02 19.91 18.78 12.13 16.68 -4.00

BPA's Offer for 01/09/02.

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 2.272 -0.003
Mar 2.261 -0.004

Natural Gas Spot Prices in $/mmBtu

Low High
Sumas 1.83 1.88
So. Cal Border 2.14 2.19
San Juan 1.95 2.00
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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.