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Merchant power gaining steam; Santa will not bring coal to CNX until 2018


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Merchant power gaining steam; Santa will not bring coal to CNX until 2018

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Merchant power gaining steam amid debt shuffle, stronger gas and retail outlook

Debt restructuring, higher natural gas prices and retail growth are key catalysts helping to improve analyst sentiment around independent power producers entering 2017, marking a nascent reversal on merchant names after a year of tumult.

EPA study may be end of trail for feds on fracking

The U.S. EPA's final study on hydraulic fracturing pleased no one but probably marked the end of federal interest in an extraction process regulated primarily by the states, said Washington, D.C., policy and investment analysts after the report's Dec. 13 release. Environmental groups looking for a widespread condemnation of fracking had to make do with scientific acknowledgement of what was already known: sometimes, in some parts of the extraction cycle, drinking water is impacted by drilling.

Santa will not bring coal to CNX until 2018, says analyst

CNX Coal Resources LP will have to "wait for its lump of coal" until 2018, according to analysts. In a recent company update from FBR & Co., analyst Lucas Pipes maintained an "outperform" rating for CNX Coal. The CEO of CONSOL Energy Inc., the sponsor of CNX Coal, said recently that the parent company hopes to complete splitting its gas and coal assets sometime in 2017.


* The U.S. Nuclear Regulatory Commission renewed the operating license of DTE Energy Co.'s Fermi 2 nuclear power plant in Michigan for 20 years despite a pending request to reopen application proceedings.

* Environmental groups have come out in opposition to Portland General Electric Co.'s plan to replace the Boardman coal-fired power plant in Morrow County, Ore., with a new gas-fired power facility. The project is included in the company's 2016 integrated resource plan. "Building a new gas-fired power plant at Boardman will lock Oregon into decades of climate-disrupting fossil fuel energy at a moment when clean energy sources like wind and solar are more affordable than ever," said Amy Hojnowski, senior campaign representative for the Sierra Club's Beyond Coal Campaign. "This is the wrong path for our state, and a disappointing step backward from PGE."

* BWX Technologies Inc. subsidiary BWXT Canada Ltd. completed its acquisition of the GE Hitachi Nuclear Energy Canada Inc. joint venture for an undisclosed sum. After closing the deal, BWX renamed the joint venture BWXT Nuclear Energy Canada Inc., according to a news release.

* Virginia's investor-owned utilities and clean energy advocates reached agreement on four legislative proposals that could increase solar power installations while boosting the profit potential for solar developers and utilities.

* An Oklahoma Corporation Commission administrative law judge lowered his recommended rate increase for Oklahoma Gas and Electric Co. to $40.7 million from $60.3 million due to an accounting error, The Oklahoman reported.

* The government of Alberta reached settlements with AltaGas Ltd. and TransCanada Corp. affiliates over disputes tied to certain power purchase agreements. Under the settlements, the PPAs held by the affiliates will be terminated and returned to the Balancing Pool.

* Washington Gov. Jay Inslee plans to convince lawmakers to pass a new measure that would impose a tax of $25 per metric ton of carbon emissions, starting in 2018, The Associated Press reported. Earlier in November, voters in Washington state rejected a ballot measure that would have taxed the use of certain fossil fuels and fossil fuel-generated electricity.

* The Hawaii Public Utilities Commission dismissed Hu'ena Power Inc.'s complaint that Hawaii Electric Light Co. Inc. violated the commission's framework for competitive bidding during its procurement process for a geothermal project. Hu'ena Power participated in the bidding, which awarded the project to Ormat Nevada Inc.

* New York regulators barred retail energy suppliers from selling to low-income New Yorkers after continued findings of price gouging by some vendors. The New York State Public Service Commission voted 3-1 on Dec. 15 to ban energy service companies, or ESCOs, from renewing or entering into new contracts with subsidized, low-income customers until new regulations are in place to prevent overcharging and deceptive practices in the retail energy market.

* NextEra Energy Inc. and Suncor Energy Inc.'s 100-MW Cedar Point wind farm in Ontario exceeded the province's allowable limit for raptor kills based on preliminary reports, Suncor spokesperson Nicole Fisher told the Sarnia Observer. The final report will be made available in March 2017.

* Hawaiian Electric Industries Inc. proposed a 6.9% increase in its Oahu electric base rates, its first in nearly six years. If approved by the Hawaii regulator, the higher revenues will help pay for operating costs, including system upgrades to increase reliability, improve customer service and integrate more renewable energy.

Natural gas/midstream

* 2017 will be a better year for oil and gas producers, a Deloitte executive predicted, but the industry's optimism is tempered by the hard lessons learned over the past two years. One of those lessons was about debt loads.

* Citing market conditions, Saddle Butte San Juan LLC has decided to withdraw its right-of-way application for the Piñon Gathering System project with the U.S. Bureau of Land Management. The proposed crude oil pipeline project in New Mexico would have included a gathering line right-of-way of about 49.5 miles and a mainline right-of-way of about 98.5 miles in length, the agency said.

* FERC wants to hear from a broad range of parties as it considers adjusting its income tax allowance and rate-of-return policies to avoid double recovery of tax costs in the rates charged by pipeline companies and partnerships.

* The Montana Board of Oil and Gas Conservation adopted a rule that requires oil and gas exploration companies to notify landowners within one-quarter mile of a proposed well about their drilling plans, The Associated Press reported. Such notifications would be necessary to obtain drilling permits.


* The U.S. Department of Agriculture is reinstating an exception to the Colorado Roadless Rule to allow coal companies to build temporary roads for coal exploration and coal-related surface activities in the 19,700-acre North Fork Coal Mining Area, according to the Federal Register. The rule will take effect Feb. 17, 2017.

* The EPA has appealed an October ruling ordering it to craft a plan and schedule to comply with rules that require a tally of effects of its regulations on the U.S. coal industry.

* An NPR investigation found that the number of advanced black lung, or progressive massive fibrosis, cases among Appalachian coal miners is more than 10 times what federal regulators report. "The actual extent of [progressive massive fibrosis] in U.S. coal miners remains unclear," said the report, which appears in the "Morbidity and Mortality Weekly Report," published by the Centers for Disease Control and Prevention.

* Murray Energy Corp. CEO Robert Murray told CNN Money that he has asked President-elect Donald Trump to "temper" his coal job promises. While Murray believes that Trump will help stop the shrinking market share of coal, he noted that coal employment "can't be brought back" to levels seen before President Barack Obama assumed office.


* The propane market reacted to cold weather and signs of improving demand during the trading week and moved to the highest levels in more than two years. Lone Star pipeline-grade propane at Mont Belvieu, Texas, rose 0.45 cent to trade at 63.00 cents per gallon in the week ended Dec. 16, while non-LST propane increased 0.65 cent to trade at 62.45 cents per gallon. Prices at the hub in Conway, Kan., gained 1.15 cents and traded at 61.40 cents per gallon.

* After a settle 1.9 cents lower at $3.415/MMBtu ahead of the weekend, January 2017 gas remained weak in overnight trading leading up to the Monday, Dec. 19, open, as milder weather forecasts continue to feed anticipation of diminished heating demand and a reprise of modest storage withdrawals in the weeks ahead.

* Price action for day-ahead power could be biased lower Monday, Dec. 19, as ongoing losses at the natural gas futures arena conspire with expectations for easing demand in much of the country as the workweek unfolds. Easing almost 2 cents in the Dec. 16 session, front-month natural gas futures were down another 6.7 cents overnight on profit-taking.

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New from RRA

* Exelon Corp. gained 4.0% and was the best performer among RRA-covered utilities for the week ended midday Friday. On Tuesday, the company announced it was reversing one-time charges totaling $120 million.

* On Dec. 16, the Public Utility Commission of Texas approved certain amendments to its existing rules pertaining to interconnection agreements involving distributed generation owners.


"Avista failed to carry its burden to show that its current rates are not fully sufficient to meet its needs," the Washington Utilities and Transportation Commission said in denying Avista Corp. any increase in its gas and electric rates.

The day ahead

* Early morning futures indicators pointed to a higher opening for the U.S. equity markets. To view more SNL equity market indexes, click here. To view more SNL Energy commodities prices, click here.

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