2004/05 Winter Energy Market Assessment November 18, 2004 Federal Energy Regulatory Commission Office of Market Oversight and Investigations Disclaimer: This Report contains analyses, presentations and conclusions that may be based on or derived from the data sources cited, but do not necessarily reflect the positions or recommendations of the data providers.

OMOI’s Winter Assessment: Market’s behavior is consistent with commodity markets under tight conditions Supply Adequacy Status of Trading Infrastructure Electric Markets

Uncertainty and Supply Tightness Appear to be Driving Markets Henry Hub Prompt Month Futures Price Henry Hub Nov04-Mar05 Winter Strip Henry Hub Spot Prices on ICE

How has the supply and demand balance changed since last winter? Weather is key.

Year-on-Year Change Weather Scenarios

Year-on-Year Change Pessimistic Supply

Alternative Fuel Prices Have Moved Farther and Faster than Natural Gas Natural Gas New York No. 6 Fuel Oil Crude Oil No. 2 Fuel Oil

Speculative Trading Appears Less Significant Than Supply and Demand Conditions Short Commercial Position Long Commercial Position Long Non-Commercial Position Short Non-Commercial Position

Regional Markets, Especially the NE, Could See Price Increases With Severe Weather Pipeline Capacity Use during Peak Conditions on January 14, 2004 Reflected a Variety of System Factors

Iroquois 73% Maritimes 75% Tennessee 95% Algonquin 99% Texas Eastern 92% Transco 94% NY ISO ISO NE Portland 89%

Electricity Prices Are Rising in Response to Fuel Cost Increases

FERC’s OMOI Will Continue to Monitor Market Drivers Closely This Winter Work with public utility commissions to help them protect customers as prices flow from the wholesale to retail markets Monitor gas market activity including pipeline capacity utilization and regional prices Assess status, quality of and market reaction to natural gas storage data Monitor winter electric market behavior Pay particular attention to unexplained price movements and market activity around extreme weather