Energy Insight News for Wednesday, January 9, 2002
New year offers a host of new energy situations

A year ago, energy industry investors were looking for one thing: growth.
They weren't interested in that old-line, vertically integrated
utility-phooey on that good ol' dependable 4% to 5% dividend yield-investors
wanted growth, and flash, with visions of greenbacks dancing in their heads.

One year ago, natural gas prices were not far off their double-digits highs,
California's deregulation debacle was going strong and blackouts were
predicted to be commonplace on the West Coast, possibly New York City,
possibly other places. 

The Federal Energy Regulatory Commission, which was transformed from an
acronym nobody knew to a commission where an unannounced cough would cause
industry shudders, soon (in the early part of 2001) had a new leader in Curt
Hebert, a Mississippian with a stubborn streak tilted toward the mantra that
market solutions rule. 

But faster than you could say "Enron," the West Coast debacle eased,
companies vilified for allegedly pilfering the West were finding it hard to
impress Wall Street and the entire industry learned a very valuable lesson:
Even the highest of the high flyers can experience turbulence, even go into
a tailspin, when the gas runs out of the economy, when playing in the gray
area of the rules is discovered and gobbledygook-wrapped financials don't
sit well with critical investors. 

For the year, utilities as a whole were one of the slumping economy's bright
spots. According to Standard & Poor's, a division of The McGraw-Hill Cos.
Inc. and a sister company to Platts, the sector reported earnings advances
in the 9% range.

But that was then, this is now. What about 2002-is it more of the same? More
heartaches in terms of adapting to deregulation, cyclical pricing or
capacity overbuilding/underbuilding? Read the entire story at
http://www.energyinsight.com. 
Also, catch the latest news headlines on Energy Insight Executive, updated
twice daily.
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Market Brief    Tuesday, January 8              	
Stocks  Close   Change  % Change	
DJIA    10,150.55       (46.5)  -0.46%	
DJ 15 Util.     292.25  (4.0)   -1.36%	
NASDAQ  2,055.73        18.62   0.91%	
S&P 500 1,160.70        (4.2)   -0.36%	
                        	
Market Vols     Close   Change  % Change	
AMEX (000)      134,674 (6,359.0)       -4.51%	
NASDAQ (000)    1,862,541       (248,903.0)     -11.79%	
NYSE (000)      1,242,380       (62,857.0)      -4.82%	
                        	
Commodities     Close   Change  % Change	
Crude Oil (Feb) 21.25   (0.17)  -0.79%	
Heating Oil (Feb)       0.5695  (0.001) -0.18%	
Nat. Gas (Henry)        2.3     0.030   1.32%	
Propane (Feb)   30.25   0.00    0.00%	
Palo Verde (Feb)        24.75   0.00    0.00%	
COB (Feb)       24.75   0.00    0.00%	
PJM (Feb)       27.55   0.00    0.00%	
                        	
Dollar US $     Close   Change  % Change	
Australia $     1.908   (0.020) -1.04%	
Canada $        1.59    (0.004) -0.25%	
Germany Dmark   2.19    0.004   0.18%	
Euro    0.8919  (0.001) -0.17%	
Japan ?en     132.8   1.800   1.37%	
Mexico NP       9.18    0.030   0.33%	
UK Pound        0.6949  (0.0002)        -0.03%	
                        	
Foreign Indices Close   Change  % Change	
Arg MerVal      343.22  0.00    0.00%	
Austr All Ord.  3,364.20        (21.10) -0.62%	
Braz Bovespa    14167.58        (211.01)        -1.47%	
Can TSE 300     7782.00 (88.30) -1.12%	
Germany DAX     5236.37 4.15    0.08%	
HK HangSeng     11713.71        (178.93)        -1.50%	
Japan Nikkei 225        10695.6 (246.76)        -2.26%	
Mexico IPC      6641.14 75.70   1.15%	
UK FTSE 100     5,250.40        (43.20) -0.82%	
                        	
Source:  Yahoo!, TradingDay.com and NYMEX.com                   	
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Executive News
PNM terminates merger with Western Resources
Albuquerque, N.M.-based PNM Resources announced Tuesday its board had
officially killed the proposed deal to buy Western Resources' electric
utility subsidiaries. The deal, originally valued at over $4 billion, had
been in trouble for months, and each side sued the other in state court in
New York. PNM said the merger could be terminated after Dec. 31 under the
terms of the deal, if there had not been satisfactory progress made towards
completing the transaction. But Western has disputed that PNM had grounds to
back out of the deal. PNM sued Western in October seeking to get out of the
deal alleging breach of contract, in part because of adverse rulings from
the Kansas Corporation Commission (KCC) on rates and a Western restructuring
plan considered vital to the transaction.

Western fired back with its own lawsuit a month later, seeking at least $650
million in damages against PNM for alleged extortion, breach of contract,
sabotage and improper interference in the KCC proceedings. Neither case has
been decided, although PNM has asked the court to either dismiss Western's
case or delay action on it until after it has decided PNM's initial suit.
Western also has appealed the KCC order blocking a planned restructuring in
preparation for the PNM transaction to a Kansas district court. Western
fired back with its own lawsuit a month later, seeking at least $650 million
in damages against PNM for alleged extortion, breach of contract, sabotage
and improper interference in the KCC proceedings. Neither case has been
decided, although PNM has asked the court to either dismiss Western's case
or delay action on it until after it has decided PNM's initial suit. Western
also has appealed the KCC order blocking a planned restructuring in
preparation for the PNM transaction to a Kansas district court.

Nine states will sue if pollution controls are weakened
The attorneys general of nine northeastern U.S. states said Tuesday they
would sue to block new federal regulations should they weaken pollution
controls at power plants. The Bush administration is considering changes to
so-called "new source review" regulations that "verge on the wholesale
weakening of the Clean Air Act," N.Y. Attorney General Eliot Spitzer told a
press briefing. Although the attorneys general focused on the adverse impact
on air quality caused by emissions from coal-burning power plants in the
Midwest, changes in the NSR program would also affect oil refineries. The
attorneys general said they would consider challenging the administrative
process that led to the new regulations which provided industry "unfettered
access," Spitzer said, but denied access to the states.

The Bush administration would also be violating federal statutes "by
changing the rules in the middle of the game," Connecticut Attorney General
Richard Blumenthal said. The new source review program requires industrial
facilities to install new pollution control equipment when they upgrade
their operations. The Environmental Protection Agency, under the Clinton
administration, filed suit that was joined by several states, alleging that
a number of utilities upgraded their plants under the guise of doing routine
maintenance to avoid the NSR requirements. The EPA also initiated vigorous
enforcement of the NSR program against refiners, which led to a number of
multi-million dollar settlements of NSR violations. The refinery and utility
industry are lobbying for changes to the program.

To subscribe to our Executive News Service, which is updated twice daily,
log on to http://www.energyinsight.com, or contact Platt's Direct Response
Team at 1-800-424-2908 (if outside the United States call 1-720-548-5700).
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