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Western Price Survey

Febuary 10, 2006
Palo Verde Unit to Shut for Repairs; Weakening Gas Saps Power Price Strength

Arizona Public Service continues to keep Unit No. 1 at the Palo Verde nuclear power plant operating at 25 percent because of an unresolved problem with vibration of some pipes. The utility has reported that it is now awaiting parts for a permanent solution to the problem, and when they arrive it will shut the 1,243 MW unit down entirely in order to do the repairs. The parts are expected in about a week.

An Orange County blaze that broke out Monday has burned just under 10,000 acres so far and is now nearly three-quarters contained. This Sierra fire, as it is called, threatens high-voltage transmission lines owned and operated by Southern California Edison, but has not managed to disrupt power transfers in the region.

California Independent System Operator peak-load figures hovered comfortably near the 30,000 MW mark this week. These unremarkable demand figures and the downward slope of current gas prices kept a lid on power prices.

Southern California peak-time prices barely broke through the 60 mills/KWh ceiling this week, 5 mills less than the high at this time last week. The cost of power at SP15 ranged from 57 mills to 61 mills/KWh on Monday before slipping down to a low of 55.25 mills/KWh the following day. Trades settled for between 56.75 mills and 59.50 mills/KWh on Friday. Off-peak power prices topped out at 47.50 mills/KWh at the start of the week. After dipping down to 42.50 mills/KWh on Tuesday, the price scooted up as high as 53 mills/KWh at the end of the week, bolstered by expectations of higher demand for next-Monday deliveries.

North of Path 15 deliveries trailed the Southern California price slightly this week. Peak-time power values strained to reach the 60 mills benchmark but fell just short, maxing out at 59.25 mills/KWh on Monday. By Wednesday the cost of daytime power at NP15 was recorded at between 56.50 mills and 59 mills/KWh, slipping to between 55.50 mills and 57.75 mills/KWh on Friday. Low-demand power slated for delivery to the northern part of the state ebbed at 42.50 mills/KWh on Tuesday before bouncing back a bit the following day. Packages scheduled for next-week delivery attracted as much as 50.50 mills/KWh on Friday.

Peak-time power at the Mid-Columbia delivery point in the Northwest attracted between 48.50 mills and 51.25 mills/KWh at the start of the week. The commodity lost 1 or 2 mills in value Tuesday but rebounded the following day, trading for between 48.75 mills and 52.50 mills/KWh on Wednesday and sticking close to that range the rest of the week. Off-peak power deliveries at Mid-C changed hands for as much as 50 mills/KWh this week, often exceeding the low-end price of peak-time deliveries.

At its board meeting this week, the Los Angeles Department of Water & Power approved a $5.5 million purchase agreement for 5,860 acres of Imperial Valley land.

Trapmar Properties, a Texas corporation, is selling the land in 15 parcels to LADWP. Included in the agreement are all geothermal and water rights.

The department will use the land to develop geothermal generation for export to the greater Los Angeles area. This undertaking supports LADWP's proposed goal of reaching a 20 percent renewables portfolio standard by 2010.

The purchase also fulfills a pledge made by LADWP to the Imperial Irrigation District.

As part of IID's Green Path transmission expansion project, LADWP promised to invest in developing renewable power in the Imperial Valley.

The Green Path project involves upgrading the district's transmission system in order to export more power from the Imperial Valley to the greater Los Angeles area.

The project grew out of a study done by the Imperial Valley Study Group. The group released a report in October 2005 that detailed a plan to add 2,200 MW of transmission export capacity to the Imperial Valley by 2020.

Prior to the sale agreement, LADWP hired GeothermEx, a geothermal exploration consulting and engineering company, to evaluate the land's potential. The preliminary assessment identified approximately 85 MW of geothermal potential without drilling any exploration wells, as detailed in an LADWP board letter released this week.

The land could well have more geothermal potential, but that will be determined after the close of escrow, Randy Howard, assistant chief operating officer of power systems for LADWP, told California Energy Markets.

Any land with no geothermal potential might be used for the development of solar thermal and wind power.

Within 10 days of the effective agreement, the department is required to deposit $100,000 in escrow. The balance of the purchase is due in cash five days before the close of escrow.

The agreement will be in effect once the general manager for the project signs it. According to Carole Tucker, media spokesperson for LADWP, this should happen sometime next week.

As of yet, LADWP has identified no potential renewable-energy developers, Howard said. As for whether 100 percent of the output will go to LADWP customers, Howard ventured a guess that "Yes, since [the project] is not for marketing purposes" [Shauna O'Donnell and Samantha Yugler].

Gas Costs Continue to Slide

The bottom has yet to fall out from under Western day-ahead natural gas prices, as this week's costs are not terribly less than last week's low-end price. What has shifted, however, is the spread between the low and high price for gas deliveries.

Permian Basin gas moved for between $6.51 and $7.00/MMBtu this week. Last week, trades topped out at a purchase price of $7.60/MMBtu. A similar phenomenon was exhibited at the San Juan producing basin, where gas traded for as much as $7.48/MMBtu last week but hit a high of just $6.86/MMBtu this week.

The Energy Information Administration's report of gas in underground storage this week showed nearly 38 percent more gas--a total of 2,368 Bcf--remains stored this year than the five-year average figure of 1,719 Bcf. This large surplus has had a major effect in pressuring prices on the spot and month-ahead markets downward [S. O'D.].

Western Electricity Prices
February 6 - 10, 2006
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 44.56-221.88 7.30-65.36
Mid-Columbia 42-53 44-50
COB 46-55.50 45.50-49.75
NP 15 52.50-59.25 42-50.50
SP 15 53.50-61 42.50-45.38
Palo Verde 52-59.50 38-53

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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