![](media/image1.jpeg){width="8.5in"
height="3.5027777777777778in"}**U.S. DEPARTMENT OF ENERGY**

**Office of Energy Assurance**

**ENERGY ASSURANCE DAILY**

**January 16, 2004**

**Highlights / Major Developments**

**Many New England Gas Plants Shut Due to Price**

According to Richard Zimbone, a senior analysts with Boston-based
EnvaPower, Inc., (which provides price forecast for power traders)
"Natural gas prices are unprecedented and a lot of generators are
selling their gas and declaring their plants unavailable due to
economics." He estimates that 80 to 90 percent of the 7,972 megawatts of
capacity out of service today in New England, enough to power about 5.4
million homes , was shut due to gas prices. Bloomberg News, 1849,
January 15, 2004

**Situation Manageable in Northeast According to NGA's Gas Supply Task
Force  **

NGA\'s Gas Supply Task Force held a conference call on Thursday morning,
January 15, 2004, to continue the assessment of the operations of the
regional natural gas system during the current cold spell. The
participants included the local gas utilities from New England, the
pipeline companies serving New England, Distrigas (the LNG importer),
and two of the three LNG trucking companies that serve the region. The
overall assessment is that the weather over the next 24 hours through
Friday evening, Jan. 16, would be challenging, with very high degree day
demand projections, but that all segments of the industry were
performing well, the supply situation was good, and the situation was
manageable. The New England gas utilities reported that all resources
were being utilized.  They noted the excellent support of the pipeline
companies throughout this period.  They reported that their supply
position is good.  The system is operating well. The pipelines reported
no operational problems.  They noted some restrictions on different
points and heavy demand, but no problems anticipated and are in good
shape.

There has been heavy media coverage in New England today of a reported
gas shortage in the region suggested by the ISO\'s statement, but NGA
states that there is not and has not been a gas shortage.  Gas is
available and flowing. Email from Steve Leahy
(<sleahy@northeastgas.org>) at 2:50 pm Friday January 16, 2004

**Northeast Grid Operators Still Calling for Conservation Today** Grid
operators in New England, Quebec and New Brunswick called on customers
to conserve power for a third day in a row until the brutally cold
weather eases over the weekend. So far, however, less than 1,000
customers were without power in New England, and none due to rolling
blackouts. Reuters, 1219 January 16, 2004

**Freeze Strains Northeast Power Grid** Temperatures remained below zero
across New England on Friday morning after plunging to near record lows,
straining power grids and bringing life to a near standstill in some
places. New England set a new winter peak demand record on Thursday of
22,727 megawatts, breaking the old record of 21,535 MW set on Jan. 22.
2003. One MW of power can heat 1,000 homes. The demand for power on
Friday, forecast at a little over 28,000 MW, was expected to break
Thursday\'s record. Officials asked residents to conserve energy
voluntarily or face rolling blackouts. The Midwest also is enduring
bone-rattling temperatures that proved fatal for five people in
Michigan, The Associated Press reported. Vermont Gov. James Douglas
appeared live on the state\'s largest television network to urge New
England residents to save energy and help prevent rolling blackouts,
which may be needed in an extreme circumstance. ISO New England Inc.,
the company responsible for maintaining the region\'s power grid, called
for customers to conserve power until 9:00 pm Friday evening, and is
preparing to shut off power to some customers Friday if necessary to
keep the grid working. But early Friday no blackouts had been reported.
The weather has created high demand for electricity, and as a result
some power generating plants ran out of natural gas Thursday and
increased the burden on other plants, according to ISO New England.
Steve Costello, a spokesman for the Central Vermont Public Service
Corp., said it would be a first for the region if rolling blackouts are
needed. \"We\'ve never had to resort to that to maintain the stability
of the system,\" Costello said. \"But there has been very, very high
demand in New England today.\"
<http://www.cnn.com/2004/WEATHER/01/16/cold.snap/index.html>
<http://biz.yahoo.com/rc/040116/utilities_northeastutilities_weather_2.html>

**Northeast Utilities Setting New Records for Electricity Demand**
Consolidated Edison Company of New York, Inc. said today that Thursday
(January 15) set a record for one-day winter electricity use of 177,528
megawatt hours, shattering the previous weekday winter record set last
year. PPL Corporation in Pennsylvania announced that it also set a
record Friday (1/16), using 7,549 megawatts of electricity at 8 a.m.
Electricity demand on New York\'s power grid hit an all-time winter high
on Wednesday, driven by arctic-like temperatures, the state\'s grid
operator said on Thursday. But the New York Independent System Operator
said Wednesday\'s record winter demand level of 24,627 megawatts may be
short-lived with higher demand expected on Thursday. A megawatt is
enough power to serve roughly 1,000 homes.
<http://biz.yahoo.com/prnews/040116/nyf057_1.html>
<http://biz.yahoo.com/prnews/040116/phf028_1.html> Reuters, 1747,
January 15, 2004

**Hydro-Quebec Won't Resume Power Exports to U.S. Until at Least
Monday**

Hydro-Quebec, normally the biggest shipper of electricity to the
northeastern U.S. won't resume exports until at least Monday to make
sure it has enough power on hand to cope with unexpected breakdowns in
its grid. Power demand in Quebec shattered records four times this week.
Bloomberg News, 1218 January 2004

**Houston Ship Channel Reopens** Ships were running both directions
along the Houston Ship Channel on Friday morning after being halted or
restricted to one-way since early Wednesday because of dense fog, said
the U.S. Coast Guard and Houston ship pilots association. Since 12:30
a.m. CST (0630 GMT) Wednesday, ship traffic along the 53-mile (85
kilometer) channel to the busiest U.S. petrochemical port was one-way
during daytime and halted at night. Traffic was stopped from late
Thursday until 2:00 a.m. CST (0800 GMT) Friday when the fog dissipated
enough to safely resume navigation, said a spokesman for Houston Pilots,
the association of pilots who steer vessels the channel.
<http://biz.yahoo.com/djus/040115/1213001043_2.html> Reuters, 0938,
January 16, 2004

**Electricity**

See highlights and below.

**WPS\' Wisc. Kewaunee Nuke Cut to 47 Percent Power**\
Wisconsin Public Service Corp.\'s 545 megawatt Kewaunee nuclear unit in
Wisconsin was shut early Friday due to a clog in a backup cooling system
at the unit, a spokeswoman for plant operator, the Nuclear Management
Company said. \"We identified \... some clogging in a backup cooling
system - the safety injection pump,\" NMC spokeswoman Maureen Brown
said. The backup cooling system is used only in the event of an
accident, Brown said. Traders said they did not expect the outage to
last longer than a few days, at the most, adding that Kewaunee\'s
temporary loss was not enough to rattle the market, especially as it
heads into the weekend.
<http://biz.yahoo.com/rm/040116/utilities_wps_kewaunee_1.html>
<http://biz.yahoo.com/rm/040116/utilities_wps_kewaunee_2.html> Reuters
1344, January 16, 2004

**Canal Power Plant Trips Late Thursday, But Has Recovered** The Canal
power plant in the NPCC region tripped late Thursday but has since
recovered and is running near previous levels early Friday. Genscape
Overnight Update, January 16, 2004

**TVA's Sequoyah 2 Nuke Shuts Down**

The Tennessee Valley Authority\'s 1,148 MW Sequoyah 2 nuclear unit in
Tennessee was shut by early Friday due to a leak on the nonnuclear side
of the plant, a spokesman for the company said. Reuters, 1212, January
16 ,2004

**Petroleum**

**See highlights and below.**

# OPEC President Says OPEC Production Will be Maintained or Cut

# **Purnomo Yusgiantoro, President of OPEC and Indonesia'a Minister of energy and mineral resources said that at OPEC's February 10^th^ meeting, production will be maintained or cut. Bloomberg News, 1230, January 16, 2004**

# IEA Summary: Tight oil stocks continue to threaten stability

The International Energy Agency renewed Friday a call for caution over
falling OECD oil stock levels, warning of potential price volatility
should unforeseen supply disruptions occur.
<http://www.platts.com/stories/oil1.html>

**American Air Increases Fuel Surcharge Again, Others Follow Suit**\
American Airlines said on Thursday it will increase its fuel surcharge
by \$3 for one-way travel within North America, even though the world\'s
largest airline dropped a similar fuel increase a few weeks ago. United
and Continental then matched the increases. United and Continental said
the increase was needed to offset a jump in jet fuel prices over the
past few months.
<http://biz.yahoo.com/rc/040115/airlines_american_2.html>
<http://biz.yahoo.com/rm/040116/airlines_united_fuel_1.html>

**Crude Oil, Heating Oil, and Gasoline Futures all Soar Friday** NYMEX
crude oil futures rebounded strongly on Friday, soaring 4.9 percent as
traders covered short positions ahead of a three-day holiday weekend
amid freezing temperatures in the U.S. Northeast. Refined products also
recovered from sharp losses, with heating oil leaping 5.4 percent and
gasoline rocketing 6.7 percent in a shortened trading session that ended
at 1 p.m. EST. Reuters, 1356 January 16, 2004

# Signs Point To \'Heavy\' 1Q US Refinery Maintenance

\"Heavier than normal\" U.S. refinery maintenance work is expected to
shut down an average of 1 million barrels a day of production capacity
in the first quarter 2004, the International Energy Agency said Friday
in its monthly oil-market report. \"Typically, U.S. refinery capacity
utilization falls by an average of 2.6% during the first quarter of the
year, but this year it is expected to be closer to 6%, \" IEA said,
citing provisional assessments. \"Maintenance is expected to average
around 1 million b/d for the quarter, peaking between 1.2 and 1.3
million b/d at the end of February,\" IEA said. \"Initial work is
expected to be concentrated in the Padd 3 (Gulf Coast) region, and will
therefore reduce the demand for heavy crudes.\"

[http://online.wsj.com/article/0,,BT_CO_20040116_004867,00.html?mod=elc%2Dgas%2Dwat](http://online.wsj.com/article/0,,BT_CO_20040116_004867,00.html?mod=elc-gas-wat)

**Natural Gas**

**See highlights and below.**

**Exxon Mobil plans to build \$600 mln Texas LNG plant**\
Exxon Mobil Corp., the world\'s largest oil company, on Thursday said it
plans to develop a \$600 million liquefied natural gas (LNG) receiving
terminal on the Gulf Coast of Texas capable of processing 1 billion
cubic feet per day of LNG. The company said it expects the terminal,
which will process LNG for distribution throughout Texas and the United
States, to take about three years to build.
<http://biz.yahoo.com/rm/040115/energy_exxonmobil_natgas_2.html>

**Nat Gas Price Crisis Eases**

Northeastern natural gas spot prices that hit record highs Wednesday,
plunged back to earth Thursday as the bitter cold that has blanketed the
region promised to moderate today. Traders reported that the operational
flow orders and constraints were still in place that shot prices
Wednesday as high as \$70/MMBtu at New York City and sent price averages
over \$50 throughout New England and the upper Mid-Atlantic region, but
demand was met early causing prices to go into freefall. Transco zone 6
New York prices that hit \$60 early Thursday fell to around \$9 late in
trading and finished at \$8.30 at the end of trading Friday. Oil Daily,
January 16, 2004 Reuters 1400, January 16, 2004

, 2004OIL DAILY

**Northeast Pipeline Constraints Push Natural Gas Users to Oil**

A squeeze on natural gas supply in the Northeast, including mind-bending
spot price spikes over \$70 per million Btu, is forcing customers to
turn to oil products at a time of extraordinary heating demand,
exacerbating a tight situation in oil markets. The natural gas pipeline
infrastructure in the Northeast is groaning under the weight of record
demand amid single-digit temperatures and bitter sub-zero wind chills.

Market players worry that switching away from natural gas will aggravate
the tight oil market and push up prices. Many gas pipelines, with no
delivery flexibility available, have forced so-called interruptible

customers off their systems and onto oil products, from residual fuel to
diesel and No. 2 heating oil. These include the Algonquin and Tennessee
pipelines into Boston, and the Texas Eastern system into New York City
and the Mid-Atlantic region. Utilities are also ordering customers to
get off the gas to avoid under-pressure on their distribution networks.
Oil Daily, January 16, 2004

**Other News**

**State Grants Air Permits For Wisconsin Energy Coal Plants**\
Wisconsin environmental regulators gave Wisconsin Energy Corp. this week
air permits for two planned 615-megawatt coal-fired power plants, a
utility spokesman confirmed Friday. The commission didn\'t approve,
however, Wisconsin Energy\'s bid for a third, more expensive coal
generator that would have used a new technology called coal
gassification. Dow Jones News from Energy Central Daily.

**Sheboygan Falls, Wisconsin to get 300MW Natural Gas Power Plant**
Alliant Energy Corp.announced today that its subsidiary, Alliant Energy
Generation, Inc. (AEG), has assumed an option to purchase a site for a
300-megawatt (MW) simple-cycle, natural gas-fired power plant outside
Sheboygan Falls.
<http://biz.yahoo.com/rc/040116/utilities_alliant_plant_1.html>
<http://www.newscom.com/cgi-bin/prnh/20020405/LNTLOGO> )
<http://biz.yahoo.com/prnews/040116/cgf012_1.html>

**Baker Hughes - US Oil and Gas Rig Count Up Significantly this Week** -
The number of rigs searching for oil and gas in the United States rose
by 21 to 1,127 this week, oil services firm Baker Hughes said on Friday.
During the same week last year, there were 845. The number of rigs
exploring for oil and gas in Canada rose 75 to 563 compared to 520 last
year. The number of rigs searching for oil in the United States fell two
to 145, while the number of rigs searching for gas rose 23 to 980. There
were two miscellaneous rigs, just like last week.
<http://biz.yahoo.com/rc/040116/energy_rigs_bakerhughes_1.html>

# Pennsylvania Public Utility To Probe FirstEnergy Reliability

The Pennsylvania Public Utility Commission decided Friday to launch a
formal investigation of reliability performance at three FirstEnergy
Corp. utility subsidiaries. The commission said a review of reliability
data like the number and duration of customer outages suggests the
utilities may not be meeting commission reliability standards.

<http://biz.yahoo.com/djus/040116/1411000714_2.html>

**Energy Prices**

+-------------------------------+-----------+-----------+------------+
|                               | **Latest  | **Week    | **Year     |
|                               | (1        | Ago**     | Ago**      |
|                               | /16/04)** |           |            |
+-------------------------------+-----------+-----------+------------+
| **CRUDE OIL**                 | 35.16     | 34.38     | 33.58      |
|                               |           |           |            |
| **West Texas Intermediate     |           |           |            |
| US**                          |           |           |            |
|                               |           |           |            |
| \$/Barrel                     |           |           |            |
+-------------------------------+-----------+-----------+------------+
| **NATURAL GAS**               | 5.43      | 6.91      | 5.50       |
|                               |           |           |            |
| **Henry Hub**                 |           |           |            |
|                               |           |           |            |
| \$/Million Btu                |           |           |            |
+-------------------------------+-----------+-----------+------------+

> Source: Reuters

**This Week in Petroleum** from the Energy Information Administration
(EIA)

[*http://tonto.eia.doe.gov/oog/info/twip/twip.asp*](http://tonto.eia.doe.gov/oog/info/twip/twip.asp)

Last Updated on January 14, 2004

**Weekly Petroleum Status Report** from EIA**\
**[*http://www.eia.doe.gov/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/wpsr.html*](http://www.eia.doe.gov/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/wpsr.html)

Updated after 1:00pm (Eastern time) on Wednesdays

**Natural Gas Weekly Update** from EIA

[*http://tonto.eia.doe.gov/oog/info/ngw/ngupdate.asp*](http://tonto.eia.doe.gov/oog/info/ngw/ngupdate.asp)

Last Updated on January 15, 2004