Western Price Survey
February 14, 2014
The arrival of more temperate weather in the Western U.S. moderated regional energy prices this week as natural gas prices dropped from record high levels and power prices leveled off in response.
Natural gas spot prices in California rose to 10-year highs Feb. 5, according to the U.S. Energy Information Administration, as reduced natural gas inflows from the Rockies and Canada plus greater demand in the Pacific Northwest left less gas for California. The shortage also prompted five days' worth of operational flow orders to be enforced on the California Gas Transmission pipeline, which brings in gas originating in Canada, the Rockies, and the U.S. Southwest and interconnects with the Southern California Gas system. PG&E CityGate spot gas hit a 10-year high Feb. 5 of $24.55/MMBtu, while Southern California Border gas also reached a 10-year high of $21.22/MMBtu.
As cold weather exited, gas and power prices fell. Western gas hubs fell between $1.75 and $3.80, on average, in Thursday-to-Thursday trading, led by Permian, which fell $3.79 to $5.04/MMBtu (see table).
Western peak-power prices followed suit, plunging between $8.65 and $22.80 in the Feb. 7 to Feb. 14 trading period. By Feb. 14, average prices ranged from $46.80/MWh at Mid-C to $58.65 at South of Path 15. Off-peak prices dropped as well (see chart).
Working gas in storage reached 1,686 Bcf as of Friday, Feb. 7, according to EIA estimates, a net decrease of 237 Bcf from the previous week. Storage levels are now 33.9 percent less than a year ago and 27.2 percent less than the five-year average.
National natural gas production is forecast to ramp up, with the deficit to start narrowing at the end of February as conditions warm, according to Barclays analysts. They add that "sustained prices at about $5/MMBtu will likely further decrease natural gas's competitiveness against coal in the power stack."
Meanwhile, heavy rains and additional snow in California -- primarily in the northern and central Sierra Nevada range -- added 3 percent to the state's runoff forecast since Feb. 1, according to a Feb. 11 report from the California Department of Water Resources. Substantially mitigating the California drought remains a challenge, however, as statewide snowpack as of Feb. 11 is 29 percent of average.
What's ahead: A cold air mass is expected across the West with below-normal temperatures likely from Washington into Southern California and Arizona Feb. 1923. The cold weather should linger in Oregon and Washington through Feb. 27. Below-normal precipitation is forecast for California and Arizona Feb. 19-27 [Linda Dailey Paulson].
Archives of the Western Price Survey for the past year are also available online.
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