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Western Price Survey

Week's End Edition
January 9, 2009
Energy Prices Continue to Deflate Along With Economy, Milder Weather

A battery of storms in the Northwest did little to inflate energy values this week, as electricity prices were essentially flat this week on economic worries and lower energy demand. Despite cold weather predictions, even natural gas prices have not been able to move significantly higher.

In the broader economy, orders to factories in November were down for the fourth straight month in a row, according to the Commerce Department, while pending home sales slumped to their lowest level on record, the National Association of Realtors said.

As the recession tightens and job losses mount, Americans are spending less and ramping down their energy use. Companies in turn have trimmed production and staffing levels. More jobs were lost last year than anytime since 1945, the U.S. Labor Department reported, with losses hitting 524,000 in December and 2.6 million total in 2008. After World War II, there were 2.8 million jobs shed. The nation's jobless rate is now at 7.2 percent, a 16-year high.

In the energy trading arena, lower demand over the holidays and warmer-than-usual weather kept natural gas demand low. Natural gas in storage fell a modest 47 Bcf to 2.830 Tcf last week, the Energy Information Administration said. Stockpiles are now 1.1 percent higher than last year and 3.2 percent above the five-year average.

Western supplies shrank by 12 Bcf to 388 Bcf, leaving totals 1.8 percent and 7.2 percent higher than last year and the five-year average, respectively.

Erratic crude prices have also added fuel to lower natural gas prices. On Wednesday, the front-month contract for crude slipped more than 12 percent to post its steepest one-day decline since Sept. 2001. Demand for crude is low: Inventories soared last week by 6.7 million barrels, only a 1.5 million-barrel increase was expected the EIA said.

However, prices are expected to rebound next year as the economy recovers and demand strengthens. In a research note, analysts at investment bank Raymond James expects natural gas prices to grow from an average of $5/MMBtu this year to $8/MMBtu in 2010.

This weekend, the Northwest gets to start drying out after a seemingly endless stream of storms that pummeled the region with record amounts of snow and rain. The jet stream shifts north and will direct storms into Canada and help keep weather dry, AccuWeather said. This week, a large storm brought so much rain that highways were closed and thousands of people evacuated from their homes in Washington. Temperatures will be in the high 40s in Seattle and Portland, with a chance of rain.

Peak California-Oregon border prices slipped over $2 since Monday to average $46.52/MWh on Friday. Off-peak trades fell over $1 to $39.91/MWh.

Daytime Mid-Columbia trades were at an average of $42.10 Friday, down $3. Average nighttime values lost less than $1 to $39.03/MWh.

Mild weather has seemed to keep prices relatively flat this week in the Golden State. Average California prime values lost over $2 since Monday to $51.48/MWh for North of Path 15 and about 60 cents to $51.28/MWh at South of Path 15. Average off-prime trades fell $2 to $41.08/MWh in the north and added $2 to $40.11/MWh.

Demand for power fell from 31,900 MW on Monday and stayed at 31,000 for the rest of the week, according to the California Independent System Operator. On Friday, usage was projected to dip to 30,700 MW and then to 29,800 MW this weekend.

San Francisco will see sunny skies, with temperatures creeping from the high 50s into the high 60s by Sunday. And it's back to warm weather and strong winds in Southern California. This weekend, Santa Ana winds gusting up to 60 mph will return, along with temperatures that will climb from the low 70s into the low 80s in Los Angeles. The weather remains the same in Phoenix at a high of 66 Fahrenheit.

Palo Verde average peak prices settled at $41.35 Friday, up $2, while off-peak trades dropped 43 cents to $31.88/MWh.

The San Onofre Nuclear Generating Station still has its 1,070 MW second unit shut off for maintenance. Later this year, the plant will replace a steam generator there [].

Western Electricity Prices
Week's End: January 5 - 9, 2009
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 27.88-175.38 17.26-57.71
Mid-Columbia 39-46.50 34-41
COB 44-50.25 37-41.75
NP 15 47.50-55 36.75-44
SP 15 46.75-54.25 36-42.25
Palo Verde 38.75-45 30.25-36.50

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

The Western Price Survey is excerpted from Energy NewsData's comprehensive regional news services. See for yourself how NewsData reporters put events in an accurate and meaningful context -- request a sample of either or both California Energy Markets and Clearing Up.

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