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MarketWatch

Refined Products
7.28.2016

Recap: Oil prices, which were trading on the highs of the day, slipped into a free fall after the release of the EIA U.S. inventory report. Crude oil stocks unexpectedly increased by 1.7 million barrel versus expectations for a 2.3 million barrel decrease, while gasoline stocks rose 452,000 barrels, compared with an expected 40,000 barrel increase. September WTI slipped 2% to $42.28 right after the release and continued to trade lower throughout the majority of the session before slightly paring losses. This spot contract settled down $1.00, or 2.33% at $41.92. Its European counterpart settled at $43.47, down $1.40, or 3.12%.

With gasoline stocks, increasing during peak U.S. driving season, RBOB futures fell to a new four month low. September futures touched $1.3035 before paring losses to settle at $1.3214, down 2.39 cents, or 1.76%. September heating oil settled at $1.2950, down 3.10 cents, or 2.33%.

Fundamental News:
 JBC Energy reported that Iraq's oil exports are expected to remain at 3.7-3.8 million bpd for months.  It said that planned improvements to Badra, Majnoon oil fields in eastern and southern Iraq are likely to lead to higher production in 2017. 

Schlumberger continued to suspend work at four of the six drilling platforms it operates in Lake Maracaibo, Venezuela.  Operations on platforms 102, 110, 111 and 112 in Lake Maracaibo were stopped because of the lack of payment by PDVSA.

Hess Corp's chief executive, John Hess, said plans are to reduce drilling rigs in Bakken from three to two by August.  He also stated that he believes the global oil market is rebalancing. 

Bank of America Merrill Lynch said it maintained its average 2017 Brent price forecast at $61/barrel because Saudi Arabia did not increase its drilling activities to make up for other losses. 

The World Bank raised its 2016 crude oil forecast to $43/barrel compared with $41/barrel projected in April due to the rebound in recent months and the expected inventory reduction in the second half. 

Statoil's chief executive, Eldar Saetre, said he has few doubts that crude oil will again trade at about $50-$60/barrel, an increase of more than 30% compared with today's level. 

Valero expects its RIN costs to increase to $750 million-$850 million in 2016, and called for a change of who is required to comply with the federal Renewable Fuel Standard. 

The Federal Open Market Committee stated after its two day meeting that near term risks to the outlook have diminished, leaving the door open to raise rates later this year, possibly as early as September.  Nine of the ten member of Fed's policy making committee voted to leave the benchmark federal funds rate unchanged at between 0.25% and 0.50%.  It said the labor market has strengthened. 

The US Commerce Department reported that new orders for durable goods increased less than expected in June amid weak demand for machinery and other goods.  It reported that non-defense capital goods orders excluding aircraft, increased 0.2% in June after declining 0.5% in May.  Shipments of core capital goods fell by 0.4% last month.  Overall,orders for durable goods fell by 4% last month, the steepest decline since August 2014 following a 2.8% decline in May. 

The Atlanta Federal Reserve's GDPNow forecast model showed the US economy likely expanded at a 2.3% annualized rate in the second quarter following a weaker than expected report on domestic durable goods in June.

 

Early Market Call - as of 9:00 AM EDT
WTI - Sep $41.92, unchanged
RBOB - Aug $1.3369, up 1.55 cents 
HO - Aug $1.3009, up 59 points  


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Natural Gas
7.28.2016

Regulatory Matters is provided as a courtesy to our commercial customers.  Please note that the information contained in Regulatory Matters is for informational purposes only and should not be construed as legal or business advice on any subject matter.  You should not act or refrain from acting on the basis of any information included in this without seeking legal or professional advice.

Connecticut - Electric

On June 10, 2016, Utiliz LLC (Utiliz) filed with the Connecticut Public Utilities Regulatory Authority (CT PURA) a request for a declaratory ruling to determine if Utiliz is subject to the rules, regulations and licensing requirements of an electricity broker or aggregator (CT-16-06-18 Utiliz Request.docx).  Utiliz seeks to provide a concierge-type service whereby residential customers would pay a flat (non-commission based) fee and the customer would be enrolled in a plan under which Utiliz would manage switching the customer to the lowest cost plans as they become available. 

On June 24, 2016, the CT PURA issued a letter to Agera Energy, LLC (Agera) advising that recent offers violate Connecticut General Statutes (CT-14-10-05 Letter.docx).  Specifically, eight recent electricity pricing offers by Agera include termination fees that exceed the $50 threshold allowed and the CT PURA directed Agera to revise its termination fees to be compliant with Connecticut statutes.  

CES Retail Energy Supply, LLC and National Gas & Electric, LLC filed applications with the CT PURA to become electric suppliers in the state of Connecticut serving residential, commercial and industrial customers (CT-CES Retail Energy Supply Application.pdf) & (CT-National Gas & Electric Application.pdf).  Ethical Electric, Inc. has formally changed its name to CleanChoice Energy, Inc. (CT-13-07-26 Name Change.pdf).

Delaware - Electric

The Delaware State Legislature recently completed an effort resulting in an opt-in electricity affordability program that seeks longer term contracts for residential and small business customers.  Starting July 1, 2016, Direct Energy Services, LLC – exclusively contracted by the State of Delaware through the issuance of a request for proposals – will be the only electric supplier to provide a designated fixed-rate offer and services to this customer group for a period of two years (DE-Fixed Price Program.doc).   

Illinois - Electric

The Illinois Commerce Commission’s Office of Retail Market Development issued its annual report on the status of the competitive retail electricity market in Illinois (IL-ORMD Annual Report.pdf).  In brief: (1) Illinois has 89 certified alternative retail electric suppliers, a slight increase over the previous year; (2) there are 362 agents, brokers and consultants, again, a slight increase over the prior year’s number; and (3) approximately 80 percent of the total electricity consumed in the state was provided by alternative retail electricity suppliers.

Maine - Electric

Vervantis, Inc. filed an application with the Maine Public Utilities Commission (ME PUC) to become an electricity aggregator or broker for commercial and industrial customers throughout the state (ME-Vervantis Application.pdf). 

Massachusetts – Natural Gas

The Massachusetts local distribution companies (LDCs) filed a request with the Massachusetts Department of Public Utilities (MA DPU) for authorization to plan for up to 30 percent of the winter 2016-2017 gas supply requirements for capacity-exempt transportation customers.   In the two prior winter periods, the LDCs requested and the MA DPU granted emergency authorization for this amount of gas capacity planning.  In the current proceeding there is opposition to the request.  Specifically, the Massachusetts Office of the Attorney General (MA AGO) opposes the request (MA-16-52 AG Comments.pdf) for the following reasons: (1) the LDCs have not presented evidence that the request is necessary and that granting the request would not result in the lowest possible supply cost for the LDCs’ firm ratepayers; (2) an examination of LDC reports for the two prior winter periods shows a significant declining trend away from reverse migration (back to the LDC) eliminating the need for the additional planning; and (3) this matter should be addressed within the LDCs’ long-term planning proceedings.  PowerOptions, Inc. makes the following additional points in requesting that the MA DPU deny this request: (1) the availability of other fuels such as liquefied natural gas and oil has altered the market for natural gas compared to the last two winter seasons; (2) the Algonquin Incremental Market (AIM) pipeline project is coming into service in November 2016 and will expand supply capability; and (3) LDCs would be taking capacity out of the competitive market in which marketers participate (MA-16-52 PowerOptions Comments.pdf).

New Hampshire – Electric

The New Hampshire Public Utilities Commission (NH PUC) has issued an order approving two settlement agreements that require Eversource Energy (Public Service Company of New Hampshire) to divest its electric generation assets (NH-Eversource Generation Assests.pdf).  The settlements provide for, among other things, the following: (1) the sale of electric generation assets through an auction process overseen by the NH PUC; (2) projected customer savings of $165 million over the first five years subsequent to divestiture; and (3) the transition to a competitive procurement process for electric default service.     

New York – Natural Gas

On June 20, 2016, East Coast Power & Gas LLC (ECPG) filed a request with the New York Public Service Commission (NY PSC) requesting expedited dispute resolution from the NY PSC regarding capacity release from National Grid (NY-16-01271 ECPG Request.pdf).  ECPG was awarded a natural gas contract to serve a large customer beginning July 1, 2016 for a contract volume of 7,510,710 dekatherms.  ECPG understands that capacity is reallocated and released annually on November 1; however, given the size of the load in this instance, ECPG argues that an exception is warranted and that not doing so puts ECPG at a competitive disadvantage.

Pennsylvania – Electric & Natural Gas

The Pennsylvania Public Utility Commission (PA PUC) appointed Daniel Mumford as Director of the Office of Competitive Market Oversight (OCMO) and Megan Good as Deputy Director (PA-OCMO Press Release.doc).  The OCMO is a multi-bureau office that supports the PA PUC’s ongoing efforts to enhance competition and to strengthen consumer protections in Pennsylvania’s competitive natural gas and electricity markets.

Pennsylvania – Natural Gas

Pennsylvania House Bill 1731 (H.B. 1731) creates the Keystone Energy Authority (KEA), grants it the power to authorize up to 20 Keystone Energy Enhancement Zones in the Commonwealth, permits the KEA to identify barriers to the expansion of natural gas transmission and distribution infrastructure and allows for the provision of policy recommendations to the Governor and General Assembly (PA-HB 1731.pdf).  Additionally, it permits natural gas, manufacturing, petrochemical and other downstream businesses to operate within a geographic zone and become eligible for state and local tax exemptions, deductions, abatements and credits for a 10-year period beginning January 1, 2017.  These businesses will also be eligible for a job creation tax credit of up to $1,250 for each full-time employment position created within the zone.  In addition to administering the program, the KEA will be responsible for: (1) facilitating the proliferation of transmission and distribution pipelines for natural gas and natural gas liquids; (2) coordinating and expediting all necessary permit and regulatory reviews required by business participants; and (3) working cooperatively with industrial development agencies, local authorities, and other agencies of the Commonwealth.  The Pennsylvania Chamber of Business and Industry is in support of this legislation (PA-PA Chamber Letter.pdf).

FERC – Electric

The Federal Energy Regulatory Commission (FERC) has issued an order approving a stipulation and consent agreement between the FERC Office of Enforcement and Lincoln Paper and Tissue, LLC (Lincoln Paper) (FERC-IN12-10-000 Lincoln Paper.pdf).  This settlement pertains to Lincoln Paper’s participation in ISO-New England’s day-ahead load response program and FERC’s anti-manipulation rule of the Federal Power Act.  Under the terms of the settlement, Lincoln Paper neither admits nor denies allegations of a false and inflated baseline and agrees to pay a civil penalty in the amount of $5 million and disgorgement of approximately $379,000 for demand response payments received from ISO-New England for demand response that did not occur.

FERC – Electric & Natural Gas

The FERC Office of Energy Projects issued its Energy Infrastructure Update (FERC Energy Infrastructure Update.pdf).  This report provides an overview of the U.S. Energy Infrastructure with natural gas (pipeline, storage and LNG) facilities and electric generation and transmission facilities including the following: (1) Transco commenced the FERC’s pre-filing process for approval to construct and operate its Northeast Supply Enhancement Project which would provide 400 MMcf/d of capacity for shippers from Transco’s Station in York County, PA to an existing interconnection between the Lower NY Bay Lateral and the Rockaway Delivery Lateral located offshore NY; (2) Eastern Shore commenced the FERC’s pre-filing process to construct and operate its 2017 Expansion Project which would provide 86.44 MMcf/d of capacity on its system in PA, MD, and NJ to meet market demand; and (3) total available installed electric generating capacity nationwide includes natural gas (505.34 gigawatts; approximately 43%) and oil (44.91 gigawatts; approximately 4%).

The FERC has issued an interim final rule to amend its regulations governing the maximum civil monetary penalties that can be assessed for violations of statutes, rules and orders under the FERC’s jurisdiction (FERC-Order 826.pdf).  The Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, requires the FERC to issue this interim final rule by July 1, 2016. 

A summary of the existing and adjusted civil monetary penalties is provided below.

 

Source

Existing Maximum Civil Penalty

New Adjusted Civil Penalty

16 U.S.C. § 825o-1(b), Sec. 316A of the Federal Power Act

$1,000,000 per violation, per day

$1,193,970 per violation, per day

16 U.S.C. § 823b(c), Sec. 31(c) of the Federal Power Act

$11,000 per violation, per day

$21,563 per violation, per day

16 U.S.C. § 825n(a), Sec. 315(a) of the Federal Power Act

$ 1,100 per violation

$2,750 per violation

15 U.S.C. § 717t-1, Sec. 22 of the Natural Gas  Act

$1,000,000 per violation, per day

$1,193,970 per violation, per day

15 U.S.C. §3414(b)(6)(A)(i), Sec. 504(b)(6)(A)(i) of the Natural Gas Policy Act of 1978

$1,000,000 per violation, per day

$1,193,970 per violation, per day

49 App. U.S.C. § 6(10)(1988), Sec. 6(10) of the Interstate Commerce Act

$500 per offense and $25 per day after the first day

$1,250 per offense and $62.50 per day after first day

49 App. U.S.C. § 16(8)(1988), Sec. 16(8) of the Interstate Commerce Act

$5,000 per violation, per day

$12,500 per violation, per day

49 App. U.S.C. § 19a(k)(1988), Sec. 19a(k) of the Interstate Commerce Act

$500 per offense, per day

$1,250 per offense, per day

49 App. U.S.C. § 20(7)(a)(1988), Sec. 20(7)(a) of the Interstate Commerce Act

$500 per offense, per day

$1,250 per offense, per day

 

Click here to view the June 2016 Regulatory Matters in a downloadable pdf.

For any inquiries, please contact:

Todd Bohan, Regulatory Specialist

tbohan@spragueenergy.com

 (603) 766-3046

 

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