Western Price Survey / Archives
January 12, 2001
What would normally be a quiet trading session heading into a low-load holiday weekend turned into a scheduling nightmare Thursday, as utility schedulers and transmission system operators prepared for the worst-rotating outages across California.
While power prices spent the first part of the week on a downward trend, the news of pending emergency sent market prices shooting higher for those unlucky enough to need to secure more resources. Gallows humor was also evident in trading rooms, as some openly hoped for storm-induced outages to relieve demand pressures. "It's cheaper than buying power," one trader quipped.
It was no laughing matter at the California Independent System Operator's headquarters, however, as dozens of reporters set up shop to be there when and if outages became a reality. Cal-ISO staff also conducted three news conferences throughout the day to update the public on the dynamic situation.
The story behind the story was a continuing financial emergency for California's utilities that was partly the cause of a sharp rise in power prices on the California Power Exchange. Some traders reported avoiding sales into CalPX and only reluctantly complying with federal orders to sell to Cal-ISO. "Am I gonna get paid?" was the question to which there was no clear answer.
After hanging around in the 320 mills/KWh range most of the week, prices for daytime power Friday climbed to 428 mills/KWh and off-peak power shot from 277 mills to 447 mills/KWh. This occurred even as volumes on the exchange plummeted to less than 150 GWh for the day.
Trading on the day-of market was very light, but prices rose to 1,000 mills/KWh for peak hours-although only about 70 MW was scared up at that premium price. This meant an even harder job for Cal-ISO, which counted as much as 15,000 MW of scheduled and unplanned unit outages this week.
The big resource problem was at PG&E's Diablo Canyon, where generation was reduced to just 20 percent of capacity through Friday because of heavy ocean swells. Also reported out were Moss Landing No. 7, Los Alamitos, a Grand Coulee unit and a Colstrip unit. Also equipment failures at Sylmar limited capacity on the DC Intertie.
Though bilateral hubs are trying to isolate themselves from California's woes, in part by keeping a lid on local prices and limiting bids into the state to avoid possible financial penalties and new federal reporting requirements, the emergency situation translated into higher prices around the region and a wide range of prices for the week.
Mid-Columbia rose to the 155 mills to 180 mills/KWh range, while California/Oregon Border came in at 175 mills to 185 mills/KWh on Thursday. Palo Verde climbed above 160 mills/KWh for peak power into the weekend.
Bonneville Power Administration had no excess energy to sell, but it did provide California with emergency exchange energy Thursday. BPA is facing limits because of native load requirements, minimum flows at Bonneville dam and maximum drafting at Grand Coulee. Still, the federal agency sent 500 MW across the border to California beginning at 3 pm Thursday, followed by 1,000 MW per hour for the duration of the Stage Three [Arthur O'Donnell].
Gas Prices Lower Slightly
The state of markets has gotten so extreme that traders have begun to see gas prices below $10/MMBtu as a relative bargain. But for one California utility, gas may be difficult to obtain at any price. Pacific Gas & Electric this week confirmed that "most" of its previous gas suppliers have declined to sell it fuel because of concerns over whether they will ever get paid.
"Nobody will touch us," sighed one utility buyer. "Oh, no, we can't do that," confirmed a national seller.
As a result, PG&E turned to heavy storage withdrawals increasing its daily take-out to more than 750 MMcfd midweek in order to keep growing demand in check. The cold front and heavy rain storms hitting the state caused customers to increase their use of gas, sending PG&E's daily system demand from 2.8 Bcfd on Monday to 3.1 Bcfd Wednesday. Even though it was slightly out of balance, the equilibrium was stil within operational limits.
Southern California Gas also experienced heavy demand, at 4.5 Bcfd midweek, and equally heavy storage withdrawals.
Still, pricing points generally eased with national NYMEX benchmarks. Topock proved the exception, first slipping to $10/MMBtu but ringing again to the $10.50 to $11/MMBtu range.
San Juan basin moved lower to $8.50/MMBtu while Permian supplies weakened to $9/MMBtu.
Malin and the PG&E CityGate also fell to the $9.30 to $9.50/MMbtu range. Meanwhile, Alberta gas was reported as high as $(C)12.98 early in the week, fell to 11.67/Gj Thursday [A. O'D.].
Cal-ISO Survives Stage Three Without Calling Outages
Although California utilities stood ready to implement rotating outages Thursday afternoon, a heroic effort by customers, power suppliers and grid operators made that unnecessary.
The California Independent System Operator declared a Stage Three Emergency beginning at 8:50 am and seemed resigned to watching millions of utility customers forced into darkness because there simply was not enough generation to meet expected demand. At one point during the day, Cal-ISO projected a 1,500 MW deficit beginning at 5 pm, but through a lot of effort it was able to avert blackouts and formally terminated the Stage Three at 5:45 pm.
Stage Three made a brief return early Friday, as hydro generation ususally working during the night had been depleted to meet the earlier emergency, Cal-ISO said. The slight return lasted from midnight until 3 am. A Stage Two was extended through Friday, but it appeared that the worst was over.
"Today was a successful day," declared managing director of operation Jim Detmers in a late evening news conference. "We were able to avoid firm load shedding interruptions." The afternoon system peak hit 31,232 MW, down substantially from the 32,408 MW forecast, and Detmers credited several sources with bridging the gap.
As much as 2,000 MW of conservation from utility customers and the state of California's own facilities "really, really helped," Detmers said. Also, the California Department of Water Resources squeezed out additional power from its operations, while shedding pumping load. But the tide was turned by an extra 1,200 MW that CDWR was able to purchase in the market and transfer to Cal-ISO, at the same time that the federal Bonneville Power Administration agreed to send 1,000 MW per hour across the Intertie on an exchange basis. The power will be returned to BPA within 24 hours on a one-for- one basis, Detmers said.
California had been experiencing sequential Stage Two alerts all week, but Thursday brought added complications in the form of a severe rain storm that forced the 2,200 MW Diablo Canyon nuclear complex to reduce output to just 20 percent of capacity. That pushed expected reserve margins at peak below 2 percent, and grid operators decided to move into a Stage Three for just the second time since taking over the transmission system in 1998.
But the Diablo Canyon limits were only part of the overall problem. During the first of three news conferences Thursday morning, Cal-ISO chief operating officer Kellan Fluckiger listed a host of troubles. More than 15,000 MW of generating assets were unavailable because of planned and unplanned outages, he said. In the 24 hours leading up to the Stage Three, several things happened, Fluckiger said:
An 800 MW generator tripped as a result of unspecified fuel problems;
A smaller unit tripped because of "excessive vibration" in its turbine bearings;
An 800 MW unit dropped offline because of a boiler tube leak;
A 200 MW unit tripped from condenser leaks;
In addition to continuing constraints along Path 15 separating Northern and Southern California, equipment failures at Sylmar also reduced transfer capacity on the DC Intertie by 350 MW.
Among unplanned outages on Thursday was the trip of Duke Energy's 750 MW Moss Landing No. 7 early this morning. Duke vice president Bill Hall said the company is investigating the cause of the outage and "employees are working feverishly around the clock to return the unit by the weekend."
Unit No. 6, also 750 MW, is on a planned outage to install new emission control equipment, Hall said. Both units are over 30 years old, but last year generated near record amounts of power.
Later in the day, additional problems, including a delay in the expected return of the Diablo Canyon units and an outage in Montana, made skies a little darker at the Folsom ISO headquarters.
The situation "probably" had been made even more difficult with the expiration Wednesday night of special federal emergency authority that required generators and utilities to help out California, Fluckiger said. Secretary of Energy Bill Richardson initially declined to extend the order that would squeeze more sales into California because, he said, the state did not certify that it had a plan to conserve 5 percent of peak load by January 16, as was required with the last extension.
Richardson on Thursday relented and extended the emergency order for another week. Cal-ISO said it was preparing its necessary certifications so that the emergency authority could be invoked starting midnight and be in effect for Friday.
Fluckiger said it was difficult to asses the impact of the expiration. Cal-ISO noted that the prior use of the order on Tuesday resulted in 700 MW less response than previous uses, and Fluckiger said that may have been due to a $64/MW cap on payments imposed by Richardson.
In the short-term, Cal-ISO will call another Stage Two on Friday, but it believes that the acute situation will pass over the weekend-if heavy seas subside and Diablo Canyon returns, and if the three day holiday brings lower loads as expected [Arthur O'Donnell].
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