Western Price Survey
January 20, 2006
Power-trading activity pretty much picked up where it had left off at the end of last week. With few pressures in the way of weather or plant outages present, little volatility was recorded during the first part of this week. A pattern of on-again, off-again rain continues to keep the West Coast somewhat soggy, but the storms that buffeted the region last week seem to have abated for the time being.
Trading commenced this week on Tuesday on account of the Martin Luther King Jr. holiday observed on Monday. In the Pacific Northwest, the Mid-Columbia price for peak-time power ranged from 53 mills to 63.75 mills/KWh. Nighttime power at the hub attracted between 33.75 mills and 40 mills/KWh in Tuesday's trading session. By Friday, the price moved all the way up to between 53 mills and 58 mills/KWh.
California-Oregon border power values topped the Mid-C prices by a few mills this week. On Tuesday the price of peak-time power at COB ranged from 57 mills to 61 mills/KWh. Prices dropped off a bit on Thursday at COB and throughout the West on account of a slippage in fuel costs. By Friday, peak power at the hub was trading for as much as 66 mills/KWh. Off-peak power attracted between 38 mills and 42 mills/KWh at the border trading point much of the week before hitting a high of 59 mills/KWh Friday.
Moving into California, the price of wholesale power on the day-ahead market in the North of Path 15 region sat comfortably within the range of 64 mills and 68 mills/KWh during the first part of the week. The price dropped as low as 60.75 mills/KWh on Thursday before gaining about 10 mills the following day.
The price of low-demand electricity at NP15 hit 45.50 mills/KWh on Tuesday before bottoming out at 39.50 mills/KWh on Wednesday. Nighttime power changed hands for a high of 60.75 mills/KWh at the end of the week.
Southern California power costs kept just ahead of NP15 prices this week. The South of Path 15 peak-time power price ranged from 66 mills to 68 mills/KWh on Tuesday before tacking on a mill or two the following day. After slipping down to between 61.25 mills and 62.75 mills/KWh in Thursday's trading session, the price topped out at 70.75 mills/KWh on Friday. Nighttime power at SP15 moved for between 41.75 mills and 61 mills/KWh this week.
In the Southwest, the 1,243 MW Unit No. 1 at the Palo Verde nuclear generating facility has been ramped all the way to zero. The unit, which returned from a refueling outage in December, had been at 32 percent of full output since its return. Plant operators were maintaining it at that level while they tried to fix a vibration issue with a pipe. This effort proved fruitless, and the unit was taken off line entirely sometime before Wednesday morning. The repair is expected to take just a few days to complete, and then the unit will go back into service.
Power prices at the PV hub stayed steady despite the loss of the big unit. Opening on Tuesday trading for between 64 mills and 66 mills/KWh, daytime power stuck close to that range for the duration of the week, tripping up to 66.75 mills/KWh only on Friday. The price of nighttime power at Palo Verde stuck close to the 40 mills/KWh mark this week, dipping just below and skipping just above that level in early-week trading
With little fanfare, the bid cap for energy sold into the California Independent System Operator markets that has been in place for more than three years was raised. Late last week the Federal Energy Regulatory Commission authorized the grid operator to increase to $400/MWh the cap for bids for real-time energy it procures to balance the system. FERC also approved the same cap level for congestion-management adjustment bids. The cap implemented in the wake of the Western energy crisis of 2000 and 2001 had been $250/MWh.
Cal-ISO requested FERC authorization for the increase late last month because it was concerned that the escalating cost of natural gas and the cost of running older generating units would keep suppliers from bidding into the real-time market for fear they would not be able to recover their costs. Staff at Cal-ISO estimated that as much as 1,000 MW of natural gas-fired generation might be unavailable if gas prices continued to rise and the cap remained at $250/MWh.
Though FERC approved the increase, it made a few modifications to Cal-ISO's proposal in its January 13 order [ER06-354].
Cal-ISO had requested that the $250/MWh "soft" cap be changed to a $400/MWh "hard" cap. In other words, rather than having the opportunity to bid above the cap level so long as they justified the bid as being necessary to cover costs, the ISO proposed the new, higher cap be firm. The grid operator justified the change on the basis that a hard cap was more in line with FERC's prior directive that the ISO move toward an even higher and hard bid cap when the market redesign and technology update (MRTU) goes into effect next year.
FERC denied the shift from a soft to a hard cap, saying that it was concerned that a hard cap, "in combination with the Cal-ISO's current must-offer obligation, could result in confiscatory rates because it would raise the possibility that sellers could be forced to operate at a loss" [Shauna O'Donnell].
Gas Costs Bottom Out, Says FERC
According to a presentation made at this week's meeting of the Federal Energy Regulatory Commission, the wholesale price of natural gas has likely dropped as low as it will go. Currently residing in the neighborhood of $7 to $9 at most trading hubs throughout the country, it is unlikely prices will drop any more as winter moves into spring, commission staff told regulators.
The very warm winter served as a cap on the price and significantly ameliorated the loss of production in the Gulf region.
In the West, gas costs ranged from a low of $6.96/MMBtu recorded at the San Juan Basin on Thursday to a high of $8.50/MMBtu hit at Pacific Gas & Electric's CityGate hub on Tuesday.
Thursday brought a dip in prices throughout the West, as spot traders were unimpressed with the Energy Information Administration's report of a removal from storage of 46 Bcf during the prior week. Even with that withdrawal, stocks of 2,575 Bcf remain 16.3 percent above the five-year average [S. O'D.].
Archives of the Western Price Survey for the past year are also available online.
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