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In This Issue

Unanimous Supreme Judicial Court Shoots Down Gas Pipeline Tax for Electric Ratepayers

Power Grid Keeps Its Cool Despite Being Hammered By The Heat

Natural Gas and Oil Market Update

EIA - Weekly Natural Gas Storage Report

NYMEX Natural Gas Week-to-Week Price Change

Natural Gas Futures - Five Year Price


NOAA 6 to 10 Day Outlook
Color indicates the probability of forecasted temperatures being above or below a historical average for the period.


Market Overviews

Unanimous Supreme Judicial Court Shoots Down Gas Pipeline Tax for Electric Ratepayers

Boston Herald | August 18, 2016

Electric utilities cannot pass on to their Massachusetts ratepayers the costs of financing new natural gas pipelines, the state's highest court ruled on Wednesday.

The unanimous decision from the Supreme Judicial Court was cheered by environmental groups, which dubbed the proposed tariffs a "pipeline tax." It was a setback, however, for Republican Gov. Charlie Baker's administration, which had viewed the financing mechanism as a means of increasing natural gas capacity and stabilizing electricity prices. Natural gas is the state's leading source of energy for generating electricity.

The Department of Public Utilities approved a rule last year that would authorize electricity distribution companies such as Eversource and National Grid to enter into long-term contracts with natural gas suppliers and recover through the tariffs some of the costs associated with pipeline construction.

The utilities argued that without those financial assurances, pipeline companies would not assume the risks involved with new construction.

The Conservation Law Foundation filed suit against the tariffs, arguing they ran afoul of a 1997 state law that restructured the electricity market in Massachusetts to separate companies that generate electricity from those that distribute it to consumers.

The high court agreed.

"The department's interpretation of the statute as permitting electric distribution companies to shift the entire risk of the investment to the ratepayers is unreasonable, as it is precisely this type of shift that the Legislature sought to preclude through the restructuring act," the justices declared.

David Ismay, CLF's lead attorney in the lawsuit, said the ruling makes clear that residential electricity customers cannot be forced to shoulder costs for private gas pipelines.

"Today our highest court affirmed Massachusetts' commitment to an open energy future by rejecting the Baker Administration's attempt to subsidize to the dying fossil fuel industry," said Ismay, in a statement.

ENGIE, a company that operates a liquefied natural gas terminal in Everett, Massachusetts, also sued to block the tariffs.

The Department of Public Utilities planned to suspend hearings on agreements Eversource and National Grid had reached with Spectra Energy for its proposed Access Northeast pipeline while the agency reviews the high court decision, administration officials said. No tariffs had yet been imposed by the state.

"Massachusetts has some of the highest electricity rates in the nation and without additional gas capacities and a diverse energy portfolio, the trends will continue to rise overtime," said Peter Lorenz, a spokesman for the state Office of Energy and Environmental Affairs. He said the DPU respects the high court's decision.

National Grid, in a statement, called the ruling a "disappointing setback," but said it would continue exploring options for moving forward with the Spectra pipeline. The company said the project would make the New England electricity grid more reliable and eventually save its customers more than $1 billion a year.

Democratic Attorney General Maura Healey, whose office generally represents state agencies in lawsuits, instead filed a brief on behalf of the plaintiffs opposing the tariffs.

The Supreme Judicial Court's decision "makes clear that if pipeline developers want to build new projects in this state, they will need to find a source of financing other than electric ratepayers' wallets," said Healey.

The state Senate voted earlier this year to clarify in state law that utilities could not pass pipeline construction costs on to ratepayers, but the provision was dropped from the final version of a bill signed last week by Baker that seeks to boost the state's reliance on hydropower, offshore wind and other renewable energy sources.

Wednesday's ruling could have ramifications beyond Massachusetts.

The Maine Public Utilities Commission approved a plan last month to require utility ratepayers to help pay for expanded natural gas, but only if other New England states acted accordingly.

Read More:

Power Grid Keeps Its Cool Despite Being Hammered By The Heat

NJ Spotlight | August 18, 2016

Aside from an occasional glitch, the grid has consistently delivered power to customers despite exceedingly high demand.

The power grid has weathered the latest brutal heat wave pretty much the way it has performed most of the summer, providing electricity to tens of millions of customers with only an occasional glitch.

No brownouts. No emergency calls for conservation, especially for big energy users. No milestones in achieving record peak-demand for electricity. This year may be on pace to set another record for hottest year ever, but it has yet to test the nation’s largest power grid.

The lack of problems can be traced to a number of factors that have occurred in the past few years, according to energy executives. They include increased investments in transmission projects and new, more-efficient gas-fired power plants replacing retired coal units.

This past Thursday, PJM Interconnection recorded the 11th-highest peak load for electricity ever, but Mike Bryson, vice president of operations, said executives were “comfortable’’ with how the system was performing despite the high temperatures.

On Friday, PJM issued a hot-weather alert for the Mid-Atlantic region continuing through the weekend, including today. The scorching heat led Public Service Electric & Gas to forecast it would approach its Sunday summer peak, attained 11 years ago yesterday, when it reached 9,310 megawatts.

Its system, however, was showing few strains. Heat-related outages were isolated and primarily due to transformer failures, which can occur when they become overloaded.

Like others, Bryson attributed enhanced reliability of the grid to upgrades to the transmission system that reduces congestion by moving power from one area to another. Bryson also said the grid is benefitting from the growing penetration of solar systems to deliver electricity and greater reliance on programs to cut electricity use.

“Energy efficiency has a lot to do with it,’’ Bryson said. In the past few years, electricity use has flattened out, not rising as fast as it has in the past.

Ron Wharton, senior director of electric operations for PSE&G, agreed. “We’ve been able to import more power into load pockets to serve customers,’’ he said, referring to an improved transmission system. “Investments in transmission are a key driver for us.’’

He also cited three new natural-gas power plants that have come online in New Jersey over the past few years. Two more are expected to become operational in the next couple of years. He, too, said increased energy efficiency and solar have helped ease demand.

One other factor also has helped offset the heat — its timing. Like another heat wave that blanketed the state in late July, the brunt of the wave occurred over the weekend when most people are off work and electricity demand falls, officials said.

Despite the high temperatures, PJM has not relied on demand response — which is when customers voluntarily reduce their energy usage at times of peak demand or high prices — to help maintain reliability.

“Every day like today, just a couple of years ago, we would have called out an emergency demand-response,’’ Bryson said. Under that scenario, some customers would mandatorily reduce their energy use up to a certain level to help maintain grid reliability. PJM has not issued such a call since 2013.

Lower wholesale electricity prices, however, have made customers less willing to shut down a portion of their operations — even if they receive payments for doing so.

The grid operator also relies on economic demand-response, in which customers voluntarily reduce use. One example is air-conditioning cycling programs; customers agree to have their units run less efficiently to reduce demand on the grid. Operated by utilities, they can achieve huge energy savings. In Baltimore, an air-conditioning cycling program has lowered usage by 400 megawatts to 500 megawatts, equivalent to a medium-sized power plant.

Read More:

Natural Gas and Oil Market Update


Natural Gas Rises on Small Storage Addition

The Wall Street Journal | August 18, 2016

Natural gas prices rose for the fifth-straight session, boosted by government data that showed a smaller-than-expected increase in stockpiles last week.
The U.S. Energy Information Administration said natural-gas stockpiles grew by 22 billion cubic feet last week, compared with the 26 bcf expected by forecasters surveyed by The Wall Street Journal. It was also less than half of the average addition for this time of year.

The report is a widely watched measure of supply and demand. A smaller-than-expected addition to storage likely indicates smaller supply or greater demand than expected, and prices moved higher immediately after the data’s release.


US Oil Soars 3.1 Pct To Settle At $48.22, Highest Level Since July 1

Reuters | August 18, 2016

Oil prices rose for a sixth straight day, with Brent hitting an eight-week high on Thursday as the world’s biggest producers prepared to discuss a possible freeze in production levels.

Brent crude oil futures rose 88 cents, or 1.79 percent, to $50.74 per barrel, near an intraday high going back to June 23.

West Texas Intermediate (WTI) crude futures were up $1.43, or 3.06 percent, at $48.22 a barrel, also near a session peak going back to July 5.

EIA - Weekly Natural Gas Storage Report

EIA - Weekly Natural Gas Storage Report

Working gas in storage was 3,339 Bcf as of Friday, August 12, 2016, according to EIA estimates. This represents a net increase of 22 Bcf from the previous week. Stocks were 327 Bcf higher than last year at this time and 405 Bcf above the five-year average of 2,934 Bcf. At 3,339 Bcf, total working gas is above the five-year historical range.

NYMEX Natural Gas Week-to-Week Price Change NYMEX Natural Gas Week-to-Week Price Change

Natural Gas Futures - Five Year Price ($ per mmBtu)

NYMEX Natural Gas Week-to-Week Price Change - Five Yearly Snapshot

Disclaimer: The information contained in these reports is gathered from public and/or internal sources and is presented solely for the convenience of our customers and Newsletter Subscribers. Patriot Energy Group makes no representation or warranty, express or implied as to the accuracy or completeness of the information set forth in this newsletter, and Patriot Energy shall not have any liability to any person or entity resulting from use of this information in any way.
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