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Western Price Survey / Archives

January 21, 2000
Western Power Prices Sit Out the Wild Winter Ride Experienced Elsewhere

Following the Monday holiday widely observed by power traders, Western spot power prices edged down slightly through the week. The relative calm in the region contrasted sharply to the turmoil in power markets back East, where killer winter storms and extreme cold temperatures drove record power loads and fuel send-outs, with corresponding high prices for energy, gas and oil.

The West saw extremes of a different sort-temperatures into the 80 degrees bracket in Arizona and Southern California. The return to service last weekend of Palo Verde No. 2 and Four Corners No. 4 meant supplies were ample to cover what turned out to be surprisingly flat demand curves. "There's no heating load," one utility scheduler reported, "and it's been flat all day." Palo Verde and Four Corners prices slipped to the 26.5 mills to 27.5 mills/KWh range, a few notches lower than where they started the week. Off-peak sank to 18 mills/KWh. A Navajo unit was reported down for a tube leak midweek, but the outage had no direct effect on prices.

Steady rains in the Pacific Northwest translated to sinking prices for peak power to 25 mills/KWh. Off-peak did not drop much further than 20 mills/KWh, mainly because of colder nights. Northern California shared in some of the rain, but more importantly, saw a few healthy snow storms that bolstered confidence in a lingering snowpack for the coming spring runoff.

Transmission constraints contributed to somewhat higher prices at California/Oregon Border and in-area trades, but COB eventually collapsed to 28 mills/KWh for Friday/Saturday deliveries.

Bids on the California Power Exchange looked like they might have been headed upward on Tuesday, with the clearing price reaching 36.8 mills, but prescheduled loads and bids dropped the following days. Friday's market saw prices slip to 30.5 mills/KWh for peak hours and 23.5 mills/KWh for off-peak.

The Alberta Power Pool experienced a several firm load alerts during evening peak hours and the top price of the week hit 498 mills/KWh Tuesday. Wednesday's peak was 119 mills/KWh and Thursday topped out at about half that in the 38 mills to 60 mills/KWh range [Arthur O'Donnell].

Natural Gas Pulled by Outside Forces

"Where do I begin?" wondered the utility gas trader when queried about this week's eventful marketplace for natural gas. In contrast to the relatively insulated power market, gas prices were definitely swayed by the heavy winter storms in other regions. Part of the reason was the pull of demand to the Midwest, which drew Canadian supplies above $(C)3.00/Gigajoule and the demand pressures added about $0.15/MMBtu to the price for Texas gas through the week-with domino impacts on Western basin and border prices.

Also, cold weather in Alberta brought some well freezes and pipelines got too loaded with gas and physical supplies were shifted out of storage to make markets. "There's a pretty tight situation in Calgary," one trader observed.

But the biggest factors were the shear volatility of gas prices in the East and the increasing prices of heating oil in response to winter cold and comments by Middle Eastern oil ministers regarding future supply curbs. Oil and gas prices are not as tied as they once were, traders noted, but you would not know that this week. As forward oil contracts topped out above $30/barrel, natural gas spot prices rocketed to nearly $20/MMBtu in New York and New England. " Package all your virtual gas for Transco 6," joked one Western trader.

With regional prices popping above NYMEX index costs, California gas utilities pulled supplies out of storage to make profitable sales. Not that local generation or residential demand was high in the face of moderate weather; the market was largely to fill in the Alberta and Permian Basin supplies that were heading elsewhere.

San Juan Basin prices grew to $2.30/MMBtu and the Southern California Border crossed $2.50/MMBtu.

Rocky Mountain supplies and San Francisco CityGate prices moved in lockstep-more or less tracking transport costs and index fluctuations.

The Alberta hub index screamed higher from the $2.80/Gj starting point to $3.10/Gj before ending Thursday at $3.11/Gj [A O'D.].

Direct Access Passes 1999 Milestones

With more than 15,000 new customers signed up by competitive energy service providers during December, California's direct-access marketplace finally breezed past significant milestones. By December 31, 1999, nearly 156,400 households and over 209,750 total accounts were taking non-utility power supplies, according to the latest figures from the California Public Utilities Commission.

After a big increase in customer switchbacks recorded during November- mostly caused by the termination of ESP Edison Source's green power offering-last month's 2,461 reversions were closer to the monthly average seen in the past year. While those reversions somewhat eroded the gain in direct-access figures from the 15,386 new switches recorded by utilities, the net increase was more than enough to push cumulative tallies to the new benchmarks.

Overall, 2.1 percent of regulated distribution company accounts are now taking direct-access service, representing 13.8 percent of electricity delivered by the three large investor-owned utilities. While most customer segments saw incremental increases, participation by the industrial class actually dropped a bit compared to last month. With 14 fewer manufacturers listed, the percentage of industrials edged below 20 percent and 31.7 percent of load for the class.

Though the 344 new direct access service requests (DASRs) processed from agricultural customers did not bring a big change numerically, it meant a notable increase in customer participation levels to 3.4 percent and 9.6 percent of that segment's load.

The CPUC reports reveal that total direct-access load on an annualized basis in now 23.5 billion KWh out of the 170 billion KWh delivered through the utilities' systems each year. Based on an estimated average California Power Exchange energy price of 25 mills/KWh, the value of direct-access power sales is about $587 million annually.

More complete statistics, including energy use and figures for DASRs received, processed and/or rescinded for each utility territory during December, are available on the CPUC's Energy Division Web site at www.cpuc.ca.gov/divisions/energy/index.htm [A O'D.].

CalPX Prices Just Barely Enough to Sustain New Entry, CEC Suggests

A new combined-cycle power plant built in Northern California during 1999 would have been able to meet its fixed operating costs and provide a reasonable return on investment based on energy sales to the California Power Exchange, according to the latest analysis from the California Energy Commission staff. However, the same plant built in Southern California would have had a more difficult time operating viably on Cal-PX sales alone.

The monthly report from the CEC's Energy Information & Analysis Division tracks how a hypothetical power plant would meet its costs based on prices paid through the Cal-PX. According to various assumptions built into the CEC model, a plant operator would need to realize at least $80/KW-year to make ends meet. Those assumptions include operating at a 6800 Btu/KWh heat rate, a $2.50/MWh variable operating and maintenance cost, and 100 percent availability factor, and the report admits "some people in the industry say a combined-cycle plant requires more than $80/KW-year in net revenue and is unlikely to run so efficiently as 6800 Btu/KWh on a consistent basis."

Be that as it may, the CEC figures show that for the month of December, the average unconstrained Cal-PX price was $29.71/MWh. Zonal prices for North of Path 15 (NP15) were $32.06/MWh and for south of that line (SP15) were $31.50, signaling some recurrent congestion in the northern system.

Because such congestion generally adds to the NP15 delivered price, the cumulative earnings for a power plant in Northern California are just over $92/KW-year-some $12/KW above the theoretical break-even point. However, SP 15 prices amount to less than $65/KW-year, said the report. The unconstrained Cal-PX price results in an unprofitable $74/KW-year earnings figure.

The CEC analysis does not draw any specific conclusions from these figures, and tight as the projected margins appear, the current state of pricing has not appeared to lessen developer's interest in building new power plants in the state [A O'D.].

APX Green Market Strengthens

The Automated Power Exchange's "green ticket" marketplace in California reported somewhat lower bid prices during the last two months of 1999, but continued strength in volumes traded. "We had excellent volume in that market," said APX green market manager Jan Pepper. From may, when it began full operations, through the end of the year, about 330,000 MWh worth of green certificates changed hands at average clearing prices of up to $5/MWh. While prices dropped toward the end of the year, the average monthly volume traded picked up. APX previously reported 175,000 MWh of trades for the five-month period May-September and now reports another 155,000 MWh for the last three months of the year.

APX's green certificates represent the value placed by retail power marketers on renewable resources over and above the straight energy commodity price, Pepper explained. With green power the most vibrant component of the California direct-access marketplace for residential customers, energy service providers showed they are willing to pay more for resources that fit California's definition of green energy.

Pepper said viable markets exist for several categories of green tickets from existing and new renewable generation developments-mainly new wind and new geothermal. There is also a market for "generic" green tickets not associated with a specific technology, she said. Certificates represent an annual purchase of renewable attributes.

APX reported that green premium prices dipped in November and December, mainly in reaction to the reduction of renewable-power customer credits distributed by the California Energy Commission. The credit was initially set at $15/MWh but dropped to $12.50/MWh on December 1; the CEC is reportedly considering a further drop in the credit next spring to make the pot of funding allowed by legislation stretch as far as possible.

Pepper also said that the 1999 green market will be held open through March, so that purchasers can true-up meter readings and account for settlement delays through the California Independent System Operator. "That way, they can make sure that everything they delivered in 1999 was green," Pepper said [A. O'D.].

Western Electricity Prices
Week of January 17-21, 2000
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 31.5-498 mills/KWh 20.5-34 mills
California PX (WAC) 30.5-36.87 mills 23.5-26.3
Mid-Columbia 25-28 18-22
COB 28.25-32 20-24
Palo Verde 26.5-29 18

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 Shauna O'Donnell, editor with questions regarding Price Survey Content.

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