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Western Price Survey

Week's End Edition
January 16, 2009
Natural Gas Down on Souring Economy, Power Prices Mixed

Natural gas prices went into freefall this week, falling to lows not seen in over two years as the economy continued to worsen. On Friday, the benchmark contract was at $4.77/MMBtu and has lost over 70 cents this week.

Western prices were faring worse and losses over the week racked up to nearly $1/MMBtu. Average prices ranged from $3.62/MMBtu at the San Juan Basin to $5.11/MMBtu at the PG&E CityGate.

The recession and accompanying drop in residential and industrial energy use have outweighed frigid temperatures in the Northeast and Midwest and pushed prices even lower. Crude's drop below $40 a barrel this week also increased pressure on natural gas prices since the two often trade in tandem. On Friday, the February crude contract closed at $36.51 a barrel, down about $1 on the week.

OPEC, which controls 40 percent of the world's crude, forecasts demand for oil will drop by 4.2 perc ent to 29.5 million barrels per day. The International Energy Agency, a Paris advisory group, expects crude demand to tumble for the second year in a row, the first time this has happened since 1983.

The bad news for the economy continued this week: Industrial production was down 2 percent in December, the Federal Reserve said this week, double the figure expected. First-time unemployment claims climbed to 54,000 last week, the Labor Department said, and unemployment now stands at 7.2 percent.

Lower demand has also translated into larger stockpiles of natural gas. Working natural gas in storage shrank by 94 Bcf last week to 2.736 Tcf, the Energy Information Administration reported. Inventory levels now stand 1 percent above last year and 3.1 higher than the five-year average.

The Western U.S. saw supplies dip to 369 Bcf, down 19 Bcf, leaving them 3.1 percent higher than a year-ago and 7.6 percent above the five-year average.

One bright spot for consumers amid the souring economy is that winter heating bills should be lower this year. The EIA, in its monthly outlook, expects residential natural gas prices to average $12.17/Mcf, or 4 percent less than last winter. Plentiful supplies thanks to an onshore drilling boom has beefed up supplies and helped dampen prices.

Average natural gas spot prices are projected to dip from $9.13/Mcf last year to $5.78/Mcf in 2009. Consumption is also expected to shrink this year by 1 percent. In 2010, as the economy recovers, natural gas prices are projected to average $6.63/Mcf, and consumption to rise by 0.7 percent.

In Western electricity markets, power demand in California was relatively flat this week, drifting down from 30,900 MW on Monday and Tuesday to 30,500 MW on Thursday, the California Independent System Operator said. Usage was expected to slip to 30,100 MW on Friday and around 29,300 MW this weekend.

In California, average prime trades picked up $1 since Monday to $49.23/MWh at NP-15, while they fell $5 to $43.01 at SP-15. Over the week, average nighttime values rose $2 to $39.83 in the north and fell $7 to $28.34/MWh in the south.

Palo Verde peak prices were off $3 at an average of $37.90/MWh. Average off-peak values settled at $27.11, down $4 for the week.

Average peak California-Oregon border prices ended the week where they started at $42.71/MWh. Off-peak prices gained nearly $3 to average $37.81.

Daytime Mid-Columbia trades slipped over $2 to an average of $36.66, while nighttime prices gained about $4 to $36/MWh.

The West is enjoying warm weather and sunny skies thanks to a ridge of high pressure blocking incoming storms and shuttling them off to into Canada, AccuWeather said. The warm weather is expected to last through Sunday.

The Columbia Generating Station in Washington State was at 65 percent capacity on Friday for maintenance, including a feedwater pump repair. The 1,150 MW plant should be back at full power by the end of the weekend. In Arizona, the Palo Verde nuclear plant had its 1,336 MW second unit at 90 percent capacity while problems with its transformer were being checked. The San Onofre Nuclear Generating Station's 1,070 MW second unit remained offline for maintenance [Kristina Shevory].

Western Electricity Prices
Week's End: January 12 - 16, 2009
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 18.65-745.67 18.52-193.99
Mid-Columbia 30.50-41.25 28-37
COB 34.50-43.75 30.75-38
NP 15 41-50 33-40.50
SP 15 40-49.25 26-36.50
Palo Verde 36.50-41.50 24.25-42

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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Contact Chris Raphael, editor with questions regarding Price Survey Content.

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