Western Price Survey
January 6, 2012
Precipitation and snowpack last month in California reached record lows in some areas.
The Northern Sierras experienced what will likely be the third-driest December in 90 years, with precipitation at 40 percent of average, according to Maurice Roos, chief hydrologist with the California Department of Water Resources.
By contrast, California's south coast and the Colorado Desert had a wet October, boosting precipitation to 60 percent of average for October-December 2011. The statewide total for that same period is 50 percent.
Based on samples taken Wednesday, Roos estimates statewide snowpack is about 18 percent of the expected seasonal average, which he says may prove the lowest in history in some places. The 2011 snowpack, however, is helping maintain reservoir storage "currently well above average."
The Pacific Northwest, from which California imports plenty of hydropower, will experience net above-normal precipitation between January and March, but the region will be "hard-pressed to see the same robust streamflow levels of last year," said Thomas E. Downs, meteorologist for Weather 2000, a private forecasting firm.
However, the mountain regions may experience a longer period of colder weather this winter that could "enhance the snowpack and streamflow later on in the spring," Downs said.
Drought years have been known to affect power prices, especially in the summer, but even if California has to cope with record-low snowpack by the start of the runoff, extremely cheap prices for natural gas could mitigate any power-price volatility.
Working gas in storage was 3,472 Bcf as of Friday, Dec. 30, according to U.S. Energy Information Administration estimates, a net decrease of 76 Bcf from the previous week. Stocks were 356 Bcf more than last year at this time and 458 Bcf above the five-year average. The agency stated that, at year's end, inventories were "at their highest levels for that week since EIA began tracking storage levels."
Following the Jan. 5 release of the storage report, natural gas futures hit $2.98 Thursday -- a 28-month low -- before rebounding to $3.06 on Friday. Barclays Capital said the storage report "reinforced the already bearish sentiment in the natural gas market," where high production from shale sources, robust storage and lax energy demand have kept prices low.
In the Dec. 30 to Jan. 6 trading period, peak prices in the West were nearly flat (see chart). Markets were closed Monday in observance of New Year's Day. Western off-peak prices edged up nominally. By Friday, average nighttime prices ranged from about $22.35 to $25.20/MWh (see chart).
What's ahead: After some California cities posted record highs this week -- El Cajon reached 90 °F Wednesday, while downtown Sacramento recorded 66 °F -- minor cooling is expected in the Los Angeles area starting Tuesday, Jan. 10. San Francisco expects dry conditions with temperatures in the mid-50s Monday through Thursday. Meanwhile, temperatures in the Pacific Northwest should remain in the 40s starting Monday. Rain is expected in Seattle Monday and there may be some rainfall in Portland by Thursday, but area meteorologists say there are "no big real rain [or] snow makers headed this way next week" [Linda Dailey Paulson].
* Prices represent both day-ahead locational marginal prices (financial swaps, or EZ Gen DA LMPs) and quasi-swap prices (EZ Gen) as reported by ICE.
Archives of the Western Price Survey for the past year are also available online.
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