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Western Price Survey

January 2, 2009
Natural Gas, Power Prices Continue Winter Slide

Cold weather can send power prices higher as natu-ral gas prices escalate, but bad economic conditions have continued to drag down demand for power.

Electricity prices sagged this week on falling natu-ral gas prices and the steady drumbeat of bad eco-nomic news. A blast of heavy snow and rain in the Northwest haven't been enough to shake prices. De-clines ranged from $4 to $12 for peak power.

Markets were closed on Thursday in observance of the New Year's holiday. On Wednesday, power was bought and sold for Friday and Saturday.

The U.S. economy can't seem to catch a break. Last month, manufacturing activity hit its lowest point in nearly three decades, according to the Institute for Supply Management. The trade group's index fell to 32.4 percent in December vs. 36.2 percent in Novem-ber. The lowest reading was 30.3 percent in June 1980. Anything below 50 signals a slowdown in in-dustrial production.

Natural gas prices on NYMEX hit their lowest year-end price in six years at $5.62/MMBtu on Wednesday. A dip in storage levels and cold weather across much of the country last week hasn't been enough to counteract the recession and its attendant lower demand for commodities.

Natural gas prices in the West, though, fell through the week, losing about $1.50 at most large trading hubs, with prices extending from $4.18/MMBtu at San Juan to $5.77/MMBtu at PG&E's City Gate.

Across the country, natural gas in storage plunged by 143 Bcf to 2.877 Tcf last week, the U.S. Energy In-formation Administration said. Inventory levels are 2.3 percent lower than a year ago and 2 percent higher than the five-year average.

The West saw natural gas storage dip by 22 Bcf to 400 Bcf, leaving them even with last year. Compared to the five-year average, storage is 7 percent higher.

One effect of falling natural gas prices is lower re-tail electricity prices. Pacific Gas & Electric is cutting electricity rates by 0.6 percent starting this month.

In the Northwest, another storm is scheduled to hit the region with more snow and rain beginning on Sunday. Winds will reach hurricane strength in the mountain passes, AccuWeather said, and up to a foot of snow will fall. In some areas, more than four times the average amount of snow fell last month. Spokane, for example, received more than five feet of snow ver-sus its previous record of 56.9 inches in 1950. Al-ready, heavy rain is falling in Portland and temperatures are in the low 40s, with flood watches and warnings in effect.

At the California-Oregon border, peak prices lost $10 since Monday to settle at an average of $49.98/MWh on Friday. Average off-peak trades dropped $4 to $42.77.

The Mid-Columbia trading hub saw average prime trades give back $12 since Monday to $45.50/MW. Nighttime deliveries lost $4 to average $41.40/MWh.

In San Francisco, rain will taper off this weekend and temperatures will be in the low 50s. It will be mostly sunny, with temperatures in the low 60s in Los Angeles, and high 60s in Phoenix.

Demand for electricity fell steadily through the week from a high of 30,600 MW on Monday to 27,400 MW on Thursday, according to the California Independent System Operator. Usage was expected to fall to 27,100 MW on Friday and then rise to 28,600 MW this weekend.

In California, average daytime prices dropped $4 for North of Path 15 to $54.27/MWh and $5 to $52.43/MWh for South of Path 15. Nighttime trades climbed 16 cents to average $44.06/MWh at NP-15 and dropped more than $3 to $39.45/MWh at SP-15.

Average Palo Verde peak prices lost $8 to $42.24/MWh. Off-peak trades fell by $5 to $32.01.

The U.S. Nuclear Regulatory Commission, which country's nuclear plant watchdog, said last week it was stepping up safety checks of the San Onofre Nu-clear Generating Station north of San Diego in reac-tion to a series of maintenance problems. Among the group's findings was that a battery that supplied power to emergency systems was inoperable for four years.

Last Friday, the plant's 1,080 MW No. 3 came back online after a maintenance outage that lasted nearly two months. But the facility's 1,070 MW No. 2 unit was shuttered for maintenance in preparation for the replacement of a steam generator later this year [Kristina Shevory].

Western Electricity Prices
Week's End: December 29, 2008 - January 2, 2009
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 16.80-103.49 15.40-71.15
Mid-Columbia 41-58 40.50-47
COB 45-60 41.75-48
NP 15 47-58.75 38-48
SP 15 46-59 36-46
Palo Verde 38.25-52 28.50-40.75

Archives of the Western Price Survey for the past year are also available online.

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