Western Price Survey / Archives
January 31, 2001
While holding the door open for a possible return to business, the California Power Exchange suspended trading activities on January 31, with a truncated Day-Of market that cleared just 1,088 MWh of demand reductions and no supply bids. The last day of bids on the previously influential Day-Ahead market showed 24 GWh at an average price of 153 mills/KWh. The low volumes continued to wreak havoc with clearing prices, and off-peak energy at 413 mills/KWh was more than three times higher than the peak figures at 127 mills/KWh.
Trading activity dwindled to just 1,375 MWh at peak. The daily volumes have plummeted following an order from the Federal Energy Regulatory Commission eliminating a requirement that California's utilities buy energy through the exchange, and prohibiting them from selling into it.
"We closed out our last market today, and I got to ring the gong at noon," said George Sladoje, CalPX's chief executive officer.
In the less-than three years of operations, CalPX moved more that 600 million megawatt hours of energy, he said. "And we've really done it without anyone noticing how difficult it was." The exchange will continue administrative functions but most expect it to close shop completely April 1, when its federal tariffs expire.
"Our biggest disappointment was that in January 1999 we introduced forward contracts," Sladoje told CALIFORNIA ENERGY MARKETS. "This was going to be the finest product we could deliver to the market. It would have changed the way the market operated and changed pricing. But we had a devil of a time getting people to trade. Now experts and economists all over the world are saying this is what needs to be done, but when we offered this in 1999 we couldn't get anyone interested."
As recently as October 2000, Sladoje pointed out, there was a five- year forward product with prices that averaged $60/MWh. "We could not get anyone to buy them. Very frustrating."
Another problem was how political California's market became. "I never envisioned the degree of political and regulatory influence on these markets," he said. Part of it was being under FERC jurisdiction and having every minor tariff change subject to protests.
Two precipitating factors led to the decision to suspend market operations. One was the FERC order directing a split market, allowing the market clearing price mechanism to hold up to $150/MWh, but requiring as-bid prices, or "matched bids" for any offers above that price. "To change the whole thing around and modify the software was just impossible," Saldoje said. "It would have taken several months and plenty of money."
The second factor was the loss of revenues from the utilities. When the utilities' credit ratings were cut to junk-bond status, that violated the PX tariff's creditworthiness standards, he said. "We had to suspend both PG&E and Edison from the market since January 18."
Western market participants had uniformly positive things to say about the CalPX administration and staff. Gary Ackerman, executive director of the Western Power Trading Forum, said that many of his members believed "The PX was the best thing that came out of California's restructuring."
"In the brief time the PX was with us it played a central role in California and the West," Ackerman said. "Instead of being a beacon of transparent prices, the PX became a casualty."
Though resigned to the fact that there did not seem to be any great rush to save the daily market, George Sladoje added, "After we're gone, I think they're going to realize they miss us" [Arthur O'Donnell].
Bilateral Prices Move Lower; CDWR Gets Another Cash Infusion
After beginning the week with the usual Monday "uncertainty premium" energy price moved lower across the West, with Northern prices falling precipitously. Mid-Columbia and California/Oregon Border prices had been as high as 500 mills/KWh Monday but dropped to 325 mills/KWh in Wednesday's trading. Off-peak prices moved into the 300 mills to 325 mills/KWh range.
Palo Verde prices had a less steep slide, moving to the 230 mills to 235 mills/KWh range midweek from around 250 mills/KWh earlier. Off- peak pegged at 130 mills/KWh.
The continuing Stage Three emergency in California contributed to an overriding sense in the market that trouble was just a few hundred megawatts away, but the California Independent System Operator did not need to trigger utility service cuts even as it continued to rely on the federal emergency order to make sure it has enough capacity to meet load. The decision by the California Public Utilities Commission last Friday to suspend the voluntary curtailment program for utility customers did not seem to have an immediate impact.
Meanwhile, the California Department of Water Resources needed another cash infusion after burning through the $400 million emergency appropriation as of Sunday. Another $500 million was packaged in new legislation authorizing the department to enter contracts with suppliers. The formal offers from last week's auction expired at noon on Wednesday, and at deadline there was no word on the outcome of negotiations.
In testimony at the Legislature Tuesday, DWR officials revealed that they had dipped into agency funds to finance power purchases, and were spending about $45 million each day. No volumes for transactions were revealed.
The state has slapped a lid on price information,. saying that revealing data could drive up prices, but it was uncertain whether the DWR schedulers are applying any kind of bargaining skills at all. One out-of-state seller indicated it seemed to be a "name your price" bargaining effort this week.
Cal-ISO has started detailing names of generation units unavailable for service, both for scheduled maintenance and unplanned outages. About three dozen units were in the unplanned category Wednesday, including three units each at Pittsburg and Potrero and a Hunters Point unit in the San Francisco area. Four units at Highgrove and individual units at Redondo Beach, Los Alamitos and Long Beach, were among major outages reported in the south. Cal-ISO said about 8,600 MW all told was unavailable this week [A. O'D.].
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