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2,836 | 2002-02-13T00:00:00 | 107-82 | Electricity Electricity markets in the United States emerged in mid to late 2001 from a period of significant turmoil into a period of relative calm with respect to spot electricity price movements |
2,837 | 2002-02-13T00:00:00 | 107-82 | Most of the increased volatility in spot electric prices occurred on the West Coast of the United States particularly in California but also in the Pacific Northwest Figure 1 |
2,840 | 2002-02-13T00:00:00 | 107-82 | The relative calm that has characterized the West Coast market since last winter is demonstrated by the fact that between June 1 2001 and February 8 2002 the average daily percent change in COB electricity spot prices has been 96 percent with a maximum absolute change of 84 percent |
2,841 | 2002-02-13T00:00:00 | 107-82 | Many of the conditions that contributed to the electricity market squeeze in California in late 2000early 2001 are no longer operative and the prospects for continued calm in electricity prices through 2003 are good |
2,842 | 2002-02-13T00:00:00 | 107-82 | Unfortunately one of the contributors to lower electricity market volatility is the significant slowdown in the US economy in 2001 particularly as demonstrated by the dramatic decline in industrial output which is still pervading the economic environment |
2,843 | 2002-02-13T00:00:00 | 107-82 | It should be noted that despite the volatility in some spot electricity markets most retail electricity customers in the United States have seen only marginal increases in delivered electricity costs and moderate declines in 2002 are likely |
2,844 | 2002-02-13T00:00:00 | 107-82 | This result stems from the fact that at the retail level electricity prices are still regulated in many States |
2,845 | 2002-02-13T00:00:00 | 107-82 | Some States particularly California have seen large changes in delivered electricity prices but for most areas retail price changes have been relatively small over the last two years |
2,846 | 2002-02-13T00:00:00 | 107-82 | Some of the pressure on electricity prices that emerged in 2000 and early 2001 were related to fuel costs and the availability of adequate amounts of certain kinds of generating capacity |
2,847 | 2002-02-13T00:00:00 | 107-82 | Throughout 2000 natural gas spot prices were rising steadily because of strong demand and stagnant or declining productive capacity |
2,848 | 2002-02-13T00:00:00 | 107-82 | The economy was expanding rapidly and incremental natural gas demand requirements were outstripping the capacity to produce new supplies |
2,849 | 2002-02-13T00:00:00 | 107-82 | Natural gas inventories fell steadily to very low levels at the beginning of the 20002001 heating season setting the stage for significant increases in natural gas costs to enduse customers including electric power generators |
2,850 | 2002-02-13T00:00:00 | 107-82 | At this time oil prices were also well above typical levels because of the tight condition of world oil markets |
2,851 | 2002-02-13T00:00:00 | 107-82 | It should be noted that a concomitant reduction in hydroelectric resources in 2000 due of course to exogenous weather factors only served to tighten electricity markets by in effect removing an important component of everyday electricity supply capacity |
2,853 | 2002-02-13T00:00:00 | 107-82 | In late 2000 very cold temperatures shocked energy markets by moving heating demandrelated energy use to well above normal levels |
2,854 | 2002-02-13T00:00:00 | 107-82 | The resulting squeeze on natural gas markets resulted in one of the most dramatic runups in natural gas prices ever seen in the United States with the result that industrial and power generating companies as well as other energy users saw fuel costs soar |
2,855 | 2002-02-13T00:00:00 | 107-82 | For power generators some alternatives to natural gas alleviated some of the pressure |
2,856 | 2002-02-13T00:00:00 | 107-82 | In fact the 20002001 winter turned out to be one of the busiest winters for oilburning power stations in many years |
2,857 | 2002-02-13T00:00:00 | 107-82 | While oilfired generating capacity represents only a marginal source of alternative electricity supply this development nevertheless helped prevent gas price runups from being even worse than they actually were last winter |
2,858 | 2002-02-13T00:00:00 | 107-82 | Since last winter the onset of economic recession and relatively mild weather including unusually warm heating season temperatures beginning in November of 2001 has reduced electricity and other energy demand and changed the costprice environment for electricity and other energy sources |
2,859 | 2002-02-13T00:00:00 | 107-82 | Average US natural gas spot prices are currently between one fourth and one fifth the level seen at the height of the runup last winter |
2,860 | 2002-02-13T00:00:00 | 107-82 | Oil prices are noticeably lower now than during the winter of 20002001 as well |
2,861 | 2002-02-13T00:00:00 | 107-82 | Electricity spot prices now generally between 18 and 24 per megawatthour compared to 4050 in the South and East and 400500 on the West Coast during mid January 2001 |
2,862 | 2002-02-13T00:00:00 | 107-82 | Cost conditions in the near term 2002 and 2003 are expected to be such that average energy prices remain much closer to current levels than to anything resembling the high prices of late 2000 to early 2001 |
2,863 | 2002-02-13T00:00:00 | 107-82 | Moreover current supplies inventories are relatively high right now for most fuels in the United States particularly natural gas |
2,864 | 2002-02-13T00:00:00 | 107-82 | Although some tightening in natural gas markets is anticipated for 2003 prices are likely to remain quite low on average through most of 2002 |
2,865 | 2002-02-13T00:00:00 | 107-82 | Until the US economy begins to recover in earnest and domestic fuel inventories are pared to more normal levels the probability of sharp price runups is minimal |
2,866 | 2002-02-13T00:00:00 | 107-82 | In addition to the demand and fuel cost factors that have reduced the level of electricity price volatility since last winter there has been a significant number of new electric generating plants added to the US inventory over the last year or so |
2,868 | 2002-02-13T00:00:00 | 107-82 | Approximately 2000 megawatts 39 percent have been added in California |
2,869 | 2002-02-13T00:00:00 | 107-82 | Furthermore it is generally expected that a significant recovery in hydroelectric power availability on the West Coast is likely this year |
2,870 | 2002-02-13T00:00:00 | 107-82 | Such a development would further reduce the likelihood of renewed pressure on electricity prices in the region regardless of the specific entities engaged in trading there |
2,871 | 2002-02-13T00:00:00 | 107-82 | Despite a period of wide variability and sharp runups in spot electricity prices since 1999 for most retail electricity consumers price movements have been much less dramatic |
2,872 | 2002-02-13T00:00:00 | 107-82 | For example between 1999 and 2001 US residential electricity prices have risen an average of 19 percent per year |
2,874 | 2002-02-13T00:00:00 | 107-82 | For 2002 an average decline in residential electricity prices of 16 percent is expected |
2,875 | 2002-02-13T00:00:00 | 107-82 | A modest increase of about 05 percent is anticipated for 2003 as fuel costs increase moderately and as aggregate electricity demand begins to rise |
2,876 | 2002-02-13T00:00:00 | 107-82 | US electricity demand is currently estimated to have fallen by 06 percent in 2001 |
2,879 | 2002-02-13T00:00:00 | 107-82 | Enron and Electricity Prices Average wholesale electricity prices across the Nation have been relatively stable since October 2001 Figure 2 |
2,880 | 2002-02-13T00:00:00 | 107-82 | Monthly average electric power prices during this period ranged from a high of about 3800 a megawatthour to a low of about 1800 a megawatthour in response to changing demand and supply conditions |
2,887 | 2002-02-13T00:00:00 | 107-82 | Given the relative stability of wholesale electricity prices together with the collapse of Enrons stock price it is not possible to establish any meaningful correlation between electric power prices and Enrons performance in the stock market |
2,888 | 2002-02-13T00:00:00 | 107-82 | A review of average retail electricity prices calculated as average revenue per kilowatthour in relation to Enrons stock price during January 1999 through October 2001 also fails to exhibit any correlation between average retail electricity prices and Enrons stocks performance Figure 3 |
2,889 | 2002-02-13T00:00:00 | 107-82 | As electricity prices are still regulated by many State public utility commissions they do not appear to be influencing or being influenced by the Enron stock price |
2,890 | 2002-02-13T00:00:00 | 107-82 | Natural Gas Spot wellhead prices are currently averaging around 200220 per million Btu or about onequarter of what they were in January of last year when prices at the wellhead reached record levels Figure 4 |
2,891 | 2002-02-13T00:00:00 | 107-82 | These prices are measured at the Henry Huba major upstream trading center the prices of which are often used as representative of US natural gas markets |
2,892 | 2002-02-13T00:00:00 | 107-82 | Very mild winter weather during the fourth quarter of last year through January of this year has lowered heating demand considerably |
2,893 | 2002-02-13T00:00:00 | 107-82 | Heating degreedays in the fourth quarter 2001 were about 26 percent below levels from the previous fourth quarter and about 16 percent below normal while January 2002 heating degreedays were about 1417 percent below normal depending on the region and below yearago levels |
2,894 | 2002-02-13T00:00:00 | 107-82 | The low heating demand a weak economy and the ensuing excess storage levels for natural gas during the winter of 20012002 through the spring of 2002 should result in rather tepid natural gas prices in the near term |
2,895 | 2002-02-13T00:00:00 | 107-82 | At the end of last November working gas in storage was 30 percent above levels during the previous November |
2,897 | 2002-02-13T00:00:00 | 107-82 | We expect that by the end of the heating seasonless than 2 months awayworking gas in storage will be double the level at the end of last March |
2,898 | 2002-02-13T00:00:00 | 107-82 | Another factor that helped to temper natural gas prices is the relatively low price for petroleum |
2,899 | 2002-02-13T00:00:00 | 107-82 | Both crude and product prices are considerably less than they were this time last year thus relieving any upward competitive price push on natural gas |
2,900 | 2002-02-13T00:00:00 | 107-82 | With the heating season nearly over given the high storage levels and weak demand it is perhaps surprising that natural gas prices have not fallen further |
2,902 | 2002-02-13T00:00:00 | 107-82 | Yet for much of the heating season to date midDecember through midFebruary Henry Hub spot prices have remained in the 230300 per million Btu range |
2,903 | 2002-02-13T00:00:00 | 107-82 | Our current view for natural gas prices is that for much of the rest of 2002 spot wellhead prices will hover near or perhaps slightly below the 200permillionBtu level |
2,904 | 2002-02-13T00:00:00 | 107-82 | A modest recovery in prices by late 2002 or early 2003 depends largely upon the speed of recovery in the US economy weather and the net effect on gas productive capacity of the slowdown in US drilling |
2,905 | 2002-02-13T00:00:00 | 107-82 | The latest statistics from Baker Hughes show that gasdirected drilling in the United States has fallen to levels not seen since July 2000 |
2,906 | 2002-02-13T00:00:00 | 107-82 | We believe that room for some continued declines exists over the next several months because on balance aggregate lease revenues for oil and gas producers arent likely to turn upward again until midsummer |
2,907 | 2002-02-13T00:00:00 | 107-82 | This will be particularly true if oil prices remain flat or weaken instead of increasing gradually as expected |
2,908 | 2002-02-13T00:00:00 | 107-82 | For 2003 we project that as economic growth accelerates and as world oil prices rise natural gas wellhead prices will rise accordingly gaining about 50 cents per thousand cubic feet on average compared to 2002 |
2,909 | 2002-02-13T00:00:00 | 107-82 | Enron and Natural Gas Prices Very little information regarding Enrons true financial status was available to natural gas markets prior to October 16 2001 |
2,910 | 2002-02-13T00:00:00 | 107-82 | In the period from that day through February 9 2002 natural gas spot prices have fluctuated between 2 and 3 per million Btu MMBtu at the Henry Hub with only a few brief exceptions |
2,913 | 2002-02-13T00:00:00 | 107-82 | Spot prices were increasing during October which is a typical occurrence as the markets prepare for the heating season |
2,916 | 2002-02-13T00:00:00 | 107-82 | In December as temperatures declined once again forecasts were calling for cold winter temperatures in the near future and natural gas prices rose in reaction |
2,918 | 2002-02-13T00:00:00 | 107-82 | Further the generally higherthannormal temperatures during the heating season caused operators to limit withdrawals of natural gas from storage |
2,919 | 2002-02-13T00:00:00 | 107-82 | The exceptionally large volumes of gas remaining in storage pose a substantial supply cushion that has mitigated the impact of any demand pressures on the market |
2,920 | 2002-02-13T00:00:00 | 107-82 | Looking back over the past 2 years natural gas markets have experienced a remarkable period in which prices rose from just above 2 per MMBtu in January 2000 to more than 10 by the end of the year |
2,922 | 2002-02-13T00:00:00 | 107-82 | EIA examined gas market conditions and prices in two studies US Natural Gas Markets Recent Trends and Prospects for the Future May 2001 and US Natural Gas Markets MidTerm Prospects for Natural Gas Supply December 2001 |
2,923 | 2002-02-13T00:00:00 | 107-82 | These reports concluded that the high natural gas prices experienced in 2000 were caused by constrained domestic productive capacity that resulted from a sustained period of relatively low oil and natural gas prices followed by unusually high demandthe result of strong economic growth and an unusually warm summer and cold winterand a poor storage position heading into the winter season November 2000 through February 2001 |
2,924 | 2002-02-13T00:00:00 | 107-82 | EIA does not believe that the Enron situation has had a strong detrimental impact on natural gas markets |
2,925 | 2002-02-13T00:00:00 | 107-82 | The major events involving Enron do not appear to have a correlation with natural gas markets and prices |
2,926 | 2002-02-13T00:00:00 | 107-82 | Further gas price patterns during the past 2 years have reasonable explanations that did not require an extraordinary role for Enron |
2,927 | 2002-02-13T00:00:00 | 107-82 | Enron in the Electricity and Natural Gas Industries In many ways Enron was deemed a very large company |
2,928 | 2002-02-13T00:00:00 | 107-82 | Among the 33 major energy companies reporting to the Financial Reporting System FRS in 2000 Enron ranked second in total revenues 11 percent share third on total assets 9 percent share seventh on capital expenditures 4 percent share and tenth on the basis of net income 2 percent share |
2,929 | 2002-02-13T00:00:00 | 107-82 | However as the table below shows Enron accounted for less than 1 percent of total retail electricity sales generating capacity and electricity generation in the United States in 2000 |
2,932 | 2002-02-13T00:00:00 | 107-82 | Enron in the Electricity Business 2000 Enron Category Enron US Total Share PercentRetail Sales million kilowatthours 96 3421414 00003Capacity megawatts 3389 811625 04176Generation million kilowatthours 915 3800000 02400 In the natural gas business Enron was a major player in the interstate gas pipeline business |
2,933 | 2002-02-13T00:00:00 | 107-82 | Overall it had interests in 10 percent of the interstate gas pipeline capacity in the United States Table 2 |
2,936 | 2002-02-13T00:00:00 | 107-82 | Enron also has interests in some gas storage and intrastate pipeline facilities |
2,938 | 2002-02-13T00:00:00 | 107-82 | Midwest Natural Gas Transmission operates one storage field in Indiana |
2,942 | 2002-02-13T00:00:00 | 107-82 | No storage operations are associated with either Florida Gas Transmission or Northern Border |
2,945 | 2002-02-13T00:00:00 | 107-82 | Enron Interstate Natural Gas Pipelines 2001 Capacity Ownership Million Company Share cubic feet Miles Percent per dayNorthern Natural Gas Company 100 3904 15671Transwestern Gas Company 100 2836 2532Florida Gas Transmission Co 50 1742 5342Northern Border Pipeline Co 12 3094 1248Midwestern Pipeline Co 1 1000 359 Total Enron Interests 12576 25152Total US Interstate 128387 214528Enron Interests percent 2 10 121 Enron owns 124 percent of Northern Border Partners which in turn owns 100 percent of Midwestern Pipeline |
2,947 | 2002-02-13T00:00:00 | 107-82 | annual energy outlook 2002Reference Case Electricity PricesBetween 2000 and 2020 the national average price of electricity in real 2000 dollars is projected to decline from 67 cents per kilowatthour to 65 cents per kilowatthour an average reduction of 02 percent per year mainly as a result of competition among electricity suppliers Figure 8 |
2,949 | 2002-02-13T00:00:00 | 107-82 | The cost of producing electricity is a function of fuel costs operating and maintenance costs and the cost of capital |
2,950 | 2002-02-13T00:00:00 | 107-82 | In 2000 fuel costs typically represented 22 million annuallyor 76 percent of the total operational costs fuel and variable operating and maintenancefor a 300megawatt coalfired unit and 66 million annuallyor 93 percent of the total operational costsfor a naturalgasfired combinedcycle unit of the same size |
2,951 | 2002-02-13T00:00:00 | 107-82 | For nuclear units fuel costs are typically a much smaller portion of total production costs |
2,952 | 2002-02-13T00:00:00 | 107-82 | Nonfuel operations and maintenance costs are a larger component of the operating costs for nuclear power units than for plants that use fossil fuels |
2,953 | 2002-02-13T00:00:00 | 107-82 | The impact of rising natural gas prices in the forecast is more than offset by a combination of falling coal prices and stable nuclear fuel costs |
2,954 | 2002-02-13T00:00:00 | 107-82 | After the price spikes of 2000 and 2001 natural gas prices to electricity suppliers are projected to rise by 22 percent per year in the forecast from 264 per thousand cubic feet in 2002 to 394 in 2020 Figure 9 |
2,955 | 2002-02-13T00:00:00 | 107-82 | The natural gas price increases after 2002 however are offset by forecasts of declining coal prices declining capital expenditures and improved efficiencies for new plants |
2,956 | 2002-02-13T00:00:00 | 107-82 | Before 2001 14 States including California instituted competition in their retail electricity markets |
2,964 | 2002-02-13T00:00:00 | 107-82 | It is not clear at this point to what extent the Enron situation will affect the announced plans of these States to move their electricity markets toward competitive restructuring |
2,967 | 2002-02-13T00:00:00 | 107-82 | On the other hand with the return to stability in the California electricity market as well as in national natural gas markets there have been only a few decisions to delay or reverse the announcements already made |
2,968 | 2002-02-13T00:00:00 | 107-82 | No clear trend concerning Enrons impact on electricity prices are discernible implying that the effects will be small at best |
2,969 | 2002-02-13T00:00:00 | 107-82 | Electricity SalesThe continuing saturation of electric appliances the availability and adoption of more efficient equipment and efficiency standards are expected to hold the growth in electricity sales to an average of 18 percent per year between 2000 and 2020 compared with a 30percent annual growth in GDP |
2,970 | 2002-02-13T00:00:00 | 107-82 | By 2020 electricity sales are expected to be 4916 billion kilowatthours compared to 3413 billion kilowatthours in 2000 a 44 percent increase |
2,971 | 2002-02-13T00:00:00 | 107-82 | During the 1960s electricity demand grew by more than 7 percent per year nearly twice the rate of economic growth Figure 10 |
2,972 | 2002-02-13T00:00:00 | 107-82 | In the 1970s and 1980s however the ratio of electricity demand growth to economic growth declined to 15 and 10 respectively |
2,973 | 2002-02-13T00:00:00 | 107-82 | Several factors have contributed to this trend including increased market saturation of electric appliances improvements in equipment efficiency and utility investments in demandside management programs and more stringent equipment efficiency standards |
2,974 | 2002-02-13T00:00:00 | 107-82 | Throughout the forecast growth in demand for office equipment and personal computers among other equipment is dampened by slowing growth or reductions in demand for space heating and cooling refrigeration water heating and lighting |
2,975 | 2002-02-13T00:00:00 | 107-82 | With the number of US households projected to rise by 10 percent per year between 2000 and 2020 residential demand for electricity is expected to grow by 17 percent annually to 1672 billion kilowatthours Figure 11 |
2,976 | 2002-02-13T00:00:00 | 107-82 | Electricity demand in the commercial sector is projected to grow by 23 percent per year between 2000 and 2020 |
2,978 | 2002-02-13T00:00:00 | 107-82 | Electricity is projected to account for threefourths of commercial primary energy consumption throughout the forecast |