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

**Office of Energy Assurance**

ENERGY ASSURANCE DAILY

**June 16, 2004**

**Highlights / Major Developments**

**Update \-- Palo Verde Remains Shut Down\
**Arizona Public Service and others are still investigating the incident
that led to the shutdown of the Palo Verde nuclear power plant and other
generating units on Monday morning. Nonetheless, the sequence of events
has been discovered. First, an insulator failed causing a 230 kilovolt
power line to fall into a transmission tower, creating a short circuit.
Next, protective equipment failed at a substation and also at the
switchyards at Palo Verde and Hassayamp. Next, the 3,810 MW Palo Verde
plant shut down. Then the APS\' 1,060-megawatt Redhawk Power Plant, near
the Palo Verde plant, tripped off line as did the 570-megawatt Arlington
Valley Energy Facility, about 50 miles southwest of Phoenix Duke Energy
Corp. All together nearly 4,600 MW was lost to the grid.

Reports cite an unidentified source who indicated that the start up
procedure might begin late Thursday, however, no official estimate has
been released. Once underway, the return to full operational status will
take some time. The three units will be powered up in sequence 12 hours
apart and gradually brought up to full power.

The NRC sent a team to the plant Tuesday to examine the event, and will
release its findings within 30 days, the agency said in a release.
Specifically, the NRC is investigating the failure of some backup power
supplies were cut off requiring secondary systems to activate.

Representatives of both the Western States Coordinating Council and the
California ISO credit operators at the plant and the grid for acting
quickly and appropriately and by doing so preventing the disruption from
becoming a major outage. The operators are credited with responding well
to the situation which was described by a representative of the
California ISO as having had the "potential had the potential to be like
the Aug. 14 (2003) blackout in the Northeast.\"

<http://www.energycentral.com/centers/news/daily/article.cfm?aid=4925522>

<http://pro.energycentral.com/professional/news/power/news_article.cfm?id=4928324>

<http://pro.energycentral.com/professional/news/power/news_article.cfm?id=4928325>

<http://pro.energycentral.com/professional/news/power/news_article.cfm?id=4928641>

<http://www.azcentral.com/news/articles/0616paloverde16.html>

Bloomberg 12:09, June 16, 2004

**Electricity**

**Arkansas Unit 1 Shut**

The Arkansas Nuclear Unit 1 was shut down late on Friday to repair a
small leak in the low-pressure turbine condenser.

Bloomberg 13:04, June 16, 2004

**Survey Results: Regulatory Uncertainty, System Reliability, and Aging
Infrastructure Are Top Utility Concerns**

Regulatory uncertainty, system reliability and aging physical
infrastructure are the three most critical issues facing the US electric
power industry, according to a survey of industry executives released
Tuesday. Each of the issues is linked with the other and it would be
\"extremely difficult\" to fix one without fixing all, executives said
in the survey conducted by Navigant Consulting Inc and Electric
Perspectives magazine, an Edison Electric Institute publication.
Seventy-two percent of those surveyed said regulatory uncertainty is the
\"most critical\" issue to resolve, followed by 67% who cited \"system
reliability\" and 56% who cited \"aging physical infrastructure.\"

Platts, June 15, 2004

[http://www.platts.com/Electric%20Power/headlines.jsp](http://www.platts.com/Electric Power/headlines.jsp)

**Petroleum**

**New Attack on Iraqi Oil Line\
**Saboteurs blasted a key southern pipeline for the second time in as
many days Wednesday, shutting down Iraq\'s oil exports, and gunmen
killed a security chief for the state-run Northern Oil Co. Two
explosions on the southern pipeline occurred in the same area as a blast
Tuesday. Exports were halted last month through the other export
avenue - the northern pipeline from Kirkuk to Ceyhan, Turkey - after a
May 25 bombing, Turkish officials said on condition of anonymity.\
\
Repairs to the pipe on the Faw peninsula - the main conduit for oil
exports in southern Iraq - are expected to take more than a week,
leaving oil output at a virtual standstill. Despite huge efforts to
secure oil terminals and the \"economic lifelines\" that carry oil
through Iraq\'s deserts, they are proving almost impossible to protect.
Coalition forces, Iraqi police and soldiers backed by rapid response
vehicles and air patrols are guarding hundreds of terminals, refineries
and pumping stations. But night after night, out in the open
countryside, the saboteurs manage to damage the pipelines. **\
**Reuters 10:34 am, June 16, 2004

<http://www.azcentral.com/news/articles/0616Iraq16-ON.html>

<http://news.bbc.co.uk/1/hi/world/middle_east/3811799.stm>

<http://www.energyintel.com/PublicationHomePage.asp?publication_id=31>

<http://biz.yahoo.com/rb/040616/markets_oil_3.html>

##### OPEC Asks Non-OPEC Producers to Increase Output

OPEC president Purnomo Yusgiantoro said Wednesday he would ask major oil
producing countries who don\'t belong to the cartel - such as Mexico,
Oman, Angola and Russia - to boost output to compensate for the loss of
Iraqi exports. However, both Russia and Oman have indicated that they
have no spare capacity to bring on line.\
<http://www.platts.com/Oil/headlines.jsp>

<http://news.bbc.co.uk/1/hi/world/middle_east/3811799.stm>

**CPUC Judge Affirms Need for San Francisco Transmission Line\
**Pacific Gas & Electric\'s Jefferson-Martin transmission line proposal
received a critical boost this week at the California Public Utilities
Commission. Administrative Law Judge Charlotte TerKeurst concluded the
transmission line is \"clearly necessary,\" and recommended a specific
route. The 27-mile, 230 KV transmission line is to traverse San Mateo
County and provide power to San Francisco.\
California Energy Markets, June 14, 2004

<http://pro.energycentral.com/professional/news/power/news_article.cfm?id=4928327>

**Natural Gas**

Nothing to report.

**Other News**

**Update: Shippers Risk Port Bans as Anti-Terror Deadline Nears**

The International Maritime Organization of the United Nations released
their latest survey on compliance with the new tough anti-terrorist
measures that go into effect July 1 and found that almost two-thirds of
the world\'s ships have not yet complied and risk being banned from
ports unless the comply by the end of this month. The regulations must
be approved and certified by governments and independent inspectors. The
survey was based on information from 39 governments, representing more
than 87 percent of the world\'s gross tonnage and about 67 percent of
merchant ships, including oil, gas tankers and cargo ships. Only about
28 percent of 21,374 ships surveyed had their security measures
certified, about 77 percent have submitted plans for approval. Of more
than 6,000 ports and terminals worldwide, security measures approved
for11 percent and approximately one third have submitted plans for
inspection.

Although port officials expect some delays in general, as reported in
EAD June 10, the U.S. Coast Guard anticipates no disruption to oil or
chemical markets from the new regulations citing that nearly half of the
ships entering the U.S. already meet the standards.

Bloomberg 11:22, June 16, 2004

**U.S. Energy Supply at Critical Juncture**

Cambridge Energy Research Associates Daniel Yergin sees a global
\"energy demand shock\" compounded by extremely tight world oil
supplies, constraints on U.S. natural gas production, and geopolitical
turmoil as the major factors that has the United States at a \"critical
juncture\" regarding energy. Yergin believe that risks will be
"different in the near-term from the long-term and among various energy
users and regions. But there\'s no question that the risks have gone
up.\" The solution will undoubtedly involve adapting to a new worldwide
supply-demand profile, globalizing the liquefied natural gas (LNG)
industry, adjusting current market psychology, promoting international
cooperation, maintaining a strong domestic industry, and more
realistically appraising energy reserves, environmental goals,
technological potential and geopolitical limitations, he added.

Cambridge Energy Research Associates June 15, 2004:

<http://www.cera.com/news/details/1,1308,6503,00.html>

**House Passes Energy Bill Again**

The bill is essentially unchanged from measures passed twice last year
by the House but that failed to pass in the Senate. With Senate
opposition essentially unchanged, passage by the Senate is considered to
be unlikely.

Washington Post, June 16, 2004

[*http://www.washingtonpost.com*](http://www.washingtonpost.com/)

**Global Reserves Can Maintain Growth**

British Petroleum in its annual Statistical Review of World Energy, sees
no shortage of reserves of oil and gas. The BP Chief Economist argued
that the belief that there is a looming problem is unjustified.
According to the report, reserves of oil and gas continued to grow
faster than production and there are sufficient oil reserves to meet
demand for 41 years and reserves of gas to meet demand for more than 60
years.

Oil Daily, June 16, 2004

**Energy Prices**

+-------------------------------+-----------+-----------+------------+
|                               | **Latest  | **Week    | **Year     |
|                               | (06       | Ago**     | Ago**      |
|                               | /16/04)** |           |            |
+-------------------------------+-----------+-----------+------------+
| **CRUDE OIL**                 | 37.33     | 39.96     | 30.28      |
|                               |           |           |            |
| **West Texas Intermediate     |           |           |            |
| US**                          |           |           |            |
|                               |           |           |            |
| \$/Barrel                     |           |           |            |
+-------------------------------+-----------+-----------+------------+
| **NATURAL GAS**               | 6.38      | 6.53      | 5.53       |
|                               |           |           |            |
| **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)

Updated on Wednesdays

**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)

Updated after 2:00 pm (Eastern time) on Thursdays