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Western Price Survey

February 12, 2016
Reliability Concerns Drive California Natural Gas Futures Higher

Prices for Southern California natural gas futures trended higher than benchmark Henry Hub prices as a result of the just-stopped gas leak at Southern California Gas Co.'s Aliso Canyon storage facility.

The 28 cent/MMBtu premium for winter SoCal natural gas compared to Henry Hub is the result of reliability concerns, according to Barclays, with January and February 2017 futures trading at 50 cents/MMBtu greater than the Henry Hub price. Analysts expect "increased demand for exports to Mexico at the southern border and declining production levels out of the San Juan basin" to support the trend.

The question is whether California natural gas in storage is adequate to meet next year's peak heating demand. Statewide storage is at about 90 percent of capacity as of November, but the figure may be lower given mandatory withdrawals from Aliso.

In the months ahead, hydro and continued solar generation should keep more natural gas in storage for next winter. Solar power accounted for roughly 8 percent of the state's power generation in 2015; an additional 2.4 GW of solar power is expected to come on line before year's end. Wetter weather and a stronger snow-pack should bolster hydro's contribution this summer, according to Barclays.

The California snow-water equivalent measured 20.4 inches, or 73 percent of the April 1 average, as of Feb. 11, according to the California Department of Water Resources.

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Working natural gas in storage was 2,864 Bcf as of Feb. 5, according to U.S. Energy Information Administration estimates. This is a net decrease of 70 Bcf compared to the previous week. Storage levels are now 25 percent greater than a year ago and 23.4 percent greater than the five-year average. The Pacific region recorded a 13 Bcf withdrawal.

Henry Hub gas spot values added 7 cents in Thursday-to-Thursday trading, ending at $2.12/MMBtu by Feb. 11. Western natural gas average values generally moved lower by between roughly 5 and 12 cents. Prices at Stanfield fell 12 cents, to $1.82/MMBtu.

Western peak power prices fell between $1.85 and $7.85 in Feb. 5 to Feb.12 trading. Pacific Northwest values posted the greatest losses, with Mid-Columbia down $7.85 to $13.90/MWh. Prices at the end of trading ranged from $13.90/MWh at Mid-C to $26.75/MWh at North of Path 15.

Nighttime power values varied. Pacific Northwest hubs dropped by as much as $8.55 by the end of trading, while Palo Verde values added 75 cents in trading to end at $18/MWh. Prices ranged from $13.10/MWh at Mid-C to $21.95/MWh at South of Path 15 [Linda Dailey Paulson].

In the Feb. 12 Western Price Survey, we incorrectly identified the owner of the Aliso Canyon natural gas storage facility. It is Southern California Gas Co. We regret the error.

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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