Western Price Survey / Archives
January 7, 2000
Some power traders were caught slightly off guard by a maintenance outage at Palo Verde nuclear station beginning Thursday morning. Nuclear plant operator Arizona Public Service said it was taking Unit No. 2 down to zero for about a week to repair recently detected steam leaks. Unit 2 is eventually slated for a complete overhaul of its steam generators, which have historically been prone to pinprick steam leaks.
The outage reversed the downward slope of pricing on California's Power Exchange and appeared to bolster prices in early trades for Monday of next week at the California/Oregon Border and Southwest hubs. A few marketers suggested that the return to service of nuclear units is never certain, even though APS expects a fairly routine reconnection early in the week. Surprisingly, local spot prices at Palo Verde reacted little this week, pretty much sticking to the 28.5 mills to 29 mills/KWh range. Trades for early next week jumped to 34 mills/KWh, however. At COB, the Monday price rose to 37 mills/KWh.
Up until the Palo Verde outage, the pricing trend for the week was all downhill. Rain in the Pacific Northwest and continued mild temperatures everywhere else meant light trading activity and generally moderate prices.
Probably as a result of residual doubts about system stability following the New Year's holiday, the Cal-PX began the week on a high note, with market clearing prices hitting 42.58 mills/KWh for daytime power. Demand, however, was moderate at 536 GWh, where it pretty much stayed all week except for a slight increase on Tuesday. While the load figures did not vary much, the clearing price slid steeply to 32.15 mills for Thursday deliveries, then picked up to 37.7 mills/KWh after word of Palo Verde's situation spread through the market. Off- peak power prices followed an inverted arc, moving from 30 mills to 27.15 mills/KWh midweek and closing out at 29.5 mills/KWh.
Aside from the transmission tower incident on BPA's DC Intertie late last week, there were no New Year's-related system disturbances of note. The tower outside Bend, Oregon, toppled after vandals unbolted support cables. No interruptions to power flows resulted as the system automatically switched to an alternate route.
The lack of weather extremes meant most utilities were able to rely on their own resources without pressuring the market. Mid-Columbia prices dipped from 30 mills earlier in the week to about 26 mills on very light trading. Off-peak power fell to the 19.5 mills to 20.5 mills/KWh range. The California/Oregon Border price also trended downward from 33 mills to 28.5 mills/KWh for Friday/Saturday packages, with overnight power slipping to 25.5 mills/KWh. The Alberta Power Pool instituted some system alerts early in the week and bid prices tended to run up above 50 mills/KWh [Arthur O'Donnell].
Gas Prices React to El Paso OFO; Well Freezes
Natural gas prices were pulled out of their extended holiday lull by announcement of an operational flow order on the El Paso natural gas pipeline system early in the week. Frozen wells in the Rocky Mountain ranges prevented some gas from reaching market and put pressure on utilities east of California, but the Southern California Border remained surprisingly insulated from price changes.
More important to the pricing dynamic was the mild weather being experienced across a broad swath of the West. Fuel demand for power generation remained low, except for a slight spurt of buying for replacement power when a Palo Verde nuclear unit went down for repairs midweek.
Permian Basin and San Juan Basin prices rose in tandem from a low point of about $2.08/MMBtu to about $2.20 before settling at $2.15/MMBtu on Thursday, traders said. The SoCal Border price moved in a range between $2.27 and $2.36 over the course of the week, sticking to $2.33/MMBtu when the dust settled.
Some traders noted the lack of spread between basin and border prices that made them indifferent to the origin of supplies.
"Pretty nice weather and ample storage are putting caps on gas prices," was how one utility buyer summed up the Northern system. Alberta's hub price was stable in the $(C)2.60 to $2.63/Gigajoule range [A O'D.].
DOE Considers System Reliability at San Francisco Workshop
Following the release this week of an interim report on electrical system outages that occurred during the summer of 1999, the US Department of Energy has scheduled three technical workshops across the country to focus on system reliability issues. The first session will be held in San Francisco on January 20, covering general topics of the transition to competitive energy markets and regulatory policies governing reliable transmission and distribution services. The workshop will look particularly at demand elasticity and adequacy of supply during times of peak demand.
Subsequent sessions will be held in New Orleans, Louisiana, on January 25 and Newark, New Jersey, on January 27.
The report raised serious questions about the impacts of electric industry restructuring on power reliability. It specifically focused on eight outages or system disturbances that occurred during 1999, especially the recurrent problems in Chicago and New York City. DOE secretary Bill Richardson is using the findings as support for the Clinton administration's proposed restructuring legislation "to address many of the uncertainties that exist as the industry transitions to a new restructured environment."
Copies of the interim report from the DOE Power Outage Study Team and various workshop notices are available on DOE's Web site at http://tis/eh.doe.gov/post/workshops.html [A. O'D.].
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