FW: Energy Market Report

Energy Market Report
Tuesday, December 18, 2001

*See attached pdf file.
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Western Pre-Scheduled Firm Electricity Prices($/MWh)
December 18, 2001 for December 19, 2001

Peak(Heavy)
Low Change High Change
NW/N. Rockies 27.00 -0.25 28.25 -1.25
Mid-Columbia 27.00 -0.25 28.25 -1.25
COB 29.50 -0.50 30.20 -1.80
N. California 30.50 -1.50 33.00 -2.25
Midway/Sylmar NA NA NA NA
S. California 30.00 -2.00 31.75 -3.50
Mead 30.00 -1.75 32.00 -1.50
Palo Verde 29.00 0.00 30.75 -3.00
Inland SW 29.00 0.00 32.00 -1.75
4-Corners 28.00 -2.00 30.00 -2.00
Central Rockies 27.00 -0.75 29.25 -1.75
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Off-Peak(Light)
Low Change High Change
NW/N. Rockies 22.00 5.00 23.00 -1.25
Mid-Columbia 22.00 5.00 23.00 -1.25
COB 23.50 0.50 24.00 0.00
N. California 25.00 -0.75 26.50 -1.90
Midway/Sylmar NA NA NA NA
S. California 20.00 -4.50 24.00 -4.40
Mead 22.00 -0.50 24.00 -2.50
Palo Verde 21.25 -1.50 23.50 -3.50
Inland SW 21.25 -1.25 24.00 -3.00
4-Corners 21.00 -2.75 22.50 -4.00
Central Rockies 19.00 -1.00 20.75 -2.25
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The Boxer Rebellion

On Tuesday, Western peak power prices dipped slightly amid abundant
Northwest hydro flows, sluggish holiday demand and slightly lower spot gas
prices. "A lot of schools and businesses are beginning to close for the
holidays, and loads should remain at lackluster levels until after the start
of the new year," said one marketer. Spot gas prices fell about 10 cents on
all of the Western pipelines. At the Southern California border, spot gas
reportedly traded between 2.63 to 2.68$/mmBtu, down from Monday's range of
2.74 to 2.79$/mmBtu. NYMEX Henry Hub futures contracts also slid Tuesday on
ample storage, but the decline was likely limited by colder weather
forecasts for much of the eastern half of the United States. January Hub
gas slipped 2.9 cents to close at 2.657$/mmBtu, while February lost 4.9
cents to end at 2.712$/mmBtu. After Wednesday's inventory report is
released, with most players expecting a 20 to 70-bcf draw, the AGA will
delay its next two reports due to the Christmas and New Year's holidays.
The next report will be released at 14:00 EST on Thursday, December 27, and
then again on Thursday, January 3, 2002. In the political arena, Democratic
Senators Barbara Boxer and Jon Corzine proposed legislation on Tuesday
requiring more diversification in pension plans to protect other U.S.
workers from the retirement savings fiasco that crippled many Enron Corp.
employees. The two senators also called for a thorough investigation of the
events leading up to Enron's collapse. According to Reuters, Boxer and
Corzine said about 67% of the assets in Enron 401(k) retirement plans were
invested in Enron stock, and they proposed limiting the investment an
employee can have in any one stock in their 401(k) to 20 percent. "No one
who gives investment advice would ever recommend someone being invested at
67%," said Corzine at a news conference. Their proposal also called for
limiting the time an employer can force an employee to hold a matching
employer stock contribution in the employee's individual account plan to 90
days. That proposal would increase the tax liability of the employer when
matching contributions to an employees 401(k) are made in company stock.
With Congress preparing to recess soon for the year, Boxer and Corzine's
bill will likely have to wait until next year to progress, and the bill does
not at this point have Republican support.

Heavy load energy costs in the Northwest fell by an average of 75 cents on
Wednesday, as abundant hydro flows and lower demand placed downward pressure
on the market. Light load goods gained as much as 5$/MWh on the low end
from a day ago, which was misleading since most Monday transactions took
place on the upper end of the spectrum. "There was not much of a range out
there today, and consequently not as much activity," said one
Washington-based trader. Recent rains have continued to spawn hearty river
flows in the hydro-heavy region, but water watchers warned that if the
soaking continues, rising flows could begin cutting into maximum generation.
Flow forecasts for Chief Joseph were little changed from a day ago, coming
in at 95 kcfs Wednesday, 90 kcfs Thursday and Friday, 65 kcfs Saturday, 55
kcfs Sunday, 75 kcfs Christmas Eve, and 65 kcfs on Christmas Day. Weather
forecasts for the region's major load centers called for near-normal
temperatures into the weekend, while the latest six-to-ten from the NWS was
predicting above-normal conditions for most of the Northwest from December
24 to 28.

Amid softer spot natural gas prices at the SoCal border and weaker demand,
spot electricity prices softened in the Golden State on Tuesday. Heavy load
goods at NP15 traded between 30.5 and 33$/MWh, with the bulk of deals done
above 32$/MWh. Light load pieces saw action from 25 to 26.5$/MWh, with
odd-lot deals heard as high as 27.25$/MWh. Light load goods at SP15 earned
the dubious honor of the steepest price declines in the West on Tuesday,
falling more than 4$/MWh at both ends. Traders said lighter loads were the
likely culprits, but were generally perplexed by the extent of the
softening. In other news, SCE reported it would request permission from the
CPUC to increase the rates its customers pay by 18% in 2003. The utility
emphasized that the rate hike was based solely on operating costs, and not
related to debt repayment negotiations. SCE said upgrades on its
electricity system are necessary in the near future and employee health care
costs have also dramatically increased. On the unit front, San Onofre #3
(1,080 MW) was derated by 100 MW on Tuesday, though no cause could be
determined. Gas-fired Etiwanda #4 (320 MW) returned to service, and El
Segundo #4 (335 MW) was operating at 170 MW. Calpine's Sutter Plants (546
MW) was completely off-line, down from 235 MW a day ago. Los Angeles was
expecting high temperatures in the mid-60s through Saturday, while most
other major load centers were expecting highs in the low-to-mid-50s. The
most current six-to-ten called for above-normal temperatures across
California from December 24 to 28.

Lower spot gas prices and weaker demand led to a general softening in the
day-ahead electricity market in the Southwest on Tuesday. Heavy load energy
at Palo Verde ranged between 29 and 30.75$/MWh, with unconfirmed trades as
low as 27.25$/MWh and as high as 33$/MWh. In unit news, Mohave #1 (790 MW)
was expected to return on Wednesday or Thursday following tube leak repairs
that began on Saturday, though most thought Wednesday to be a wee bit
optimistic. Further to the north, Colorado-based Craig #1 (428 MW) was
given an ETR of "sometime on Wednesday," but most participants were
reportedly not scheduling it in until Thursday. The latest six-to-ten from
the NWS called for normal temperatures in Arizona and below-normal
temperatures throughout much of New Mexico from December 24 through 28.

Patrick O'Neill and Beth Goodwin
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Western Generating Unit Outages

Current Begins Ends Reason
CAISO units <250/5480 total NA NA
planned/unplanned*
Alamitos #3/320/gas 04-Dec-01 ? planned
Big Creek Project/1020/hydro 09-Dec-01 ? @752MW,
planned
Craig#1/428/coal 15-Dec-01 19-Dec-01 unplanned*
El Segundo #3/337/gas 02-Oct-01 ? unplanned
Encina #5/332/gas 27-Oct-01 ? planned
Grand Coulee #19/600/hydro 10-Dec-01 March repairs
Helms PGP #2/407/hydro 01-Oct-01 ? planned
Hunter #2/472/coal 11-Dec-01 21-Dec-01 unknown
Hyatt/Thermalito/933/hydro 02-Oct-01 ? @607 MW,
unplanned
Mohave #1/790/coal 15-Dec-01 20-Dec-01 tube leak
Ormond Beach #2/750/gas 05-Oct-01 ? @350 MW,
unplanned
Pittsburg #6/317/gas 22-Nov-01 ? planned
Sutter Plants/546/gas 04-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)

December 18, 2001 for December 19, 2001

Peak (Heavy) in $/MWh
Low Change High Change
Into Cinergy 18.50 0.60 21.00 2.35
Western PJM 23.90 0.15 24.05 -0.45
Into Entergy 20.50 2.50 21.75 1.25
Into TVA 18.50 0.25 19.50 0.75
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Amid light trading and continued warm weather, peak power prices mostly
strengthened across the Eastern Interconnect on Tuesday. "People are
closing their positions for the year, which gave the dailies a little boost,
but I expect it to get even quieter this week as people start leaving ahead
of the holiday," said one seasoned dealer. Forecasts for Wednesday called
for temperatures to be about five degrees cooler across the East. The rest
of the week was expected to linger one to five degrees above seasonal
levels. The AGA announced the Christmas and New Year holidays would delay
the weekly report by one day, pushing its release back to Thursday, December
27 and January 3 at 14:00 EST. NYMEX Henry Hub natural gas futures settled
lower on Tuesday. The front-month contract lost 2.9 cents to end the day at
2.657$/mmBtu, while February slipped 4.9 cents to close at 2.712$/mmBtu.

As additional megawatts continued to come back on-line in the Mid-Atlantic
on Tuesday, heavy load energy costs were heard in a very tight range and
about 50 cents lower than a day ago. Western PJM goods changed hands
between 23.9 and 24.05$/MWh. After the usual early morning spike, LMPs
spent most of the day between 15 and 20$/MWh, and averaged 16.47$/MWh
through 15:00 EST. "Balance-of-the-month remains pretty soft, along with
everything else, but I bought a piece at 25.25$/MWh today," commented one
rueful PJM trader. Deals for the Jan/Feb contract were heard around
31.5$/MWh on Tuesday. High temperatures for Wednesday were expected in the
crisp 47 to 52 degree range at the major Mid-Atlantic load centers. Little
change was seen in the forecasts through Saturday. The latest six-to-ten
called for below-normal temperatures from December 24 to 28.

Forecasts for slightly cooler weather on Wednesday sent the corresponding
load projections a little higher, boosting day-ahead electricity prices in
the Midwest on Tuesday. Into Cinergy deals were done from 18.5 to 21$/MWh,
gaining a 2.35$/MWh on the high end and a less robust 60 cents on the low.
In generation news, traders reported on Monday that nuclear unit Fermi #2
(1,085 MW) was exiting a fall refueling outage and ramping up to full power.
Temperatures were only expected to reach a high of 43 degrees on Wednesday,
with forecasts for the rest of the week calling for little change. Overnight
lows were projected to be at or just below freezing. The most current
six-to-ten predicted below-normal temperatures from December 24 to 28.

Amid stronger spot natural gas prices, peak power prices in the Southeast on
Tuesday strengthened, despite mild weather and holiday-related loads. Into
Entergy pieces were bought and sold from 20.5 to 21.75$/MWh, firming up
1.25$/MWh on the high end and 2.5$/MWh on the low. Into TVA transactions
were heard between 18.5 and 19.5$/MWh. "Weather is the ringleader of the
SERC circus right now," joked one Southern trader. Nonetheless, the mercury
was forecast to dip on Wednesday, with highs only expected in the 54 to 59
degree range. Little change was predicted through Saturday. The latest
six-to-ten called for below-normal temperatures from December 24 to 28.
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California ISO Congestion Index in $/MWh

Path Peak Off-peak
for 19-Dec-01 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

OTC Forward Peak Electricity Contracts in $/MWh

Mid-C PV SP-15
Bid Ask Bid Ask Bid Ask
BOM 27.50 28.50 29.00 30.00 30.50 31.50
January 25.50 27.00 27.25 28.25 28.00 29.00
February 22.50 24.00 26.50 27.50 26.50 27.50
March 19.50 21.00 26.00 27.00 27.00 28.00
Q1 '02 22.50 24.00 26.50 27.50 27.50 28.50
Q2 '02 18.00 19.50 28.75 29.75 28.00 29.00
Q3 '02 34.00 35.50 46.00 47.00 42.25 43.25
Q4 '02 27.50 29.00 29.00 30.00 31.00 32.00
Cal '03 29.50 31.00 33.50 34.50 35.50 36.50

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 17-Dec-01 46.75 45.05 15.55 36.27 4.73

BPA's Offer for 12/20/01 through 12/22/01.

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
Jan 2.657 -0.029
Feb 2.712 -0.049

Natural Gas Spot Prices in $/mmBtu

Low High
Sumas 2.53 2.58
So. Cal Border 2.63 2.68
San Juan 2.37 2.42
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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. 2001.