A state-by-state look at retail competition.
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The natural gas trading business has been on a roll since the mid-1980s, when the Federal Energy Regulatory Commission (FERC) issued Order 436, giving birth to the concept of gas marketing companies. Even when the calendar flipped to 2001 and much of the energy industry was swept into the turmoil surrounding the California electric industry restructuring fiasco, gas marketers continued to thrive in the low-supply, high-demand environment. Gas traders pounded out deals that earned record profits for their companies.
California's woes invited increased regulatory and political scrutiny of energy trading companies, especially those headquartered in downtown Houston. But the ethos of deregulation was too firmly entrenched for even a public relations disaster such as California to turn back the clock on wholesale gas trading competition.
"It's hard to put the genie back in the bottle," says Steve Weiler, head of the Washington, D.C., energy office of the law firm of Leonard, Street and Deinard. "The invisible hand of competition will continue to govern the market."
In her recent book on gas trading, Ann O'Hara, president of the consulting division of O'Hara & Associates, emphasizes the staying power of gas competition: "One thing will remain constant through all current and future FERC activities-the U.S. natural gas industry will not return to the former days of total regulation from wellhead to burnertip."
Indeed, the fallout from California never included serious discussion about a return to the old days of gas price control. No politician or regulator proposed putting a wrecking ball to wholesale gas industry deregulation. Resistance to such chatter was a testament to how entrenched gas marketing had become over the past 15 years.
On the electric side, there was the constant bickering over refunds to power customers in the West. And there was a vigorous battle waged by San Francisco activists against Pacific Gas and Electric to municipalize the utility's assets in the city. Despite a year of pronouncements by citizen groups blasting PG&E for poor management, liberal San Franciscans still failed to pass the referendum. The referendum's defeat not only reaffirmed PG&E's clout in Sacramento and in San Francisco's city hall, it also highlighted the energy industry's resolve to rally public opinion behind the perceived benefits of private control of utility assets versus the supposed waste incurred when government grabs control of yet another public service.
Energy companies understood California political figures needed to play to their constituencies. Expressing dismay at what they called price gouging, politicians attempted to stir up public support, including threatening to lock up certain Houston energy company executives if they stepped foot in the state. There was the ongoing El Paso imbroglio at FERC, which centered on accusations that the company exercised market control over gas supplies headed to California and favored its marketing affiliate in pipeline contracts. The new administration in Washington even shoved aside the nation's top energy regulatory cop because he embraced too strongly the values of the free market at the expense of political realities.
Gas industry officials viewed these as controllable events that could