Western Price Survey / Archives
February 28, 2003
Rampaging natural gas prices this week catapulted spot power premiums to their highest levels in nearly two years. Prices at most Western hubs crashed 120 mills as temperatures throughout the region dipped a few degrees lower, though electric demand showed little increase.
Gary Ackerman, executive director of the Western Power Trading Forum, said that spiraling gas prices-and thus power prices paid to generators using natural gas for fuel-are made worse by the wretched state of energy- company finances. "Banks are leery of lending money for energy-related projects" such as drilling for gas, he said. "This creates a chain reaction [in prices] from natural gas to electricity. We might see higher gas prices on average for a period of time, probably far higher than a year ago."
According to California Independent System Operator spokesperson Gregg Fishman, streaking spot prices activated the grid operator's automatic mitigation procedure (AMP) several times this week. However, Cal- ISO never had to mitigate any bids, which generally means that generator bids were in keeping with historical levels. AMP is triggered for any hour in which prices are $91.87/KWh or higher.
Hydropower continues to be in meager supply. The Bonneville Power Administration, having had a minimum of 50 MW of off-peak power available for sale in recent weeks, rescinded that bid this week, offering only 100 MW of peak supplies for most deliveries this week and next Monday.
Heavy-load prices at many hubs thundered 40 mills to 50 mills higher between Monday and Tuesday. At Mid- Columbia, prices careened to 125 mills, and premiums at the California-Oregon border rose to 122 mills, with off-peak power at Mid-C reaching as high as 108 mills/KWh.
SP15 prices proved the biggest gainer this week, soaring to 145 mills for peak hours. NP15 prices pushed up to 132 mills, and Palo Verde power fetched prices up to 129 mills/KWh.
By midweek, prices shrank back to levels seen Monday, approximately 70 mills to 80 mills. Traders seemed baffled by the shift. "I was surprised it came back down that much. I don't know why it was such a big swing," said one trader. "But I'm not complaining."
Demand on the Cal-ISO grid briefly eclipsed 29,000 MW on Monday but mostly sat just below that mark all week. The number of unplanned outages on the Cal-ISO system bloated to 4,302 MW on Tuesday, with 3,661 MW of lost capacity occurring south of Path 15. That number dropped almost in half as the week wore on.
Southern California Edison's Mohave 1 and 2 units, each rated at 442 MW, fell off line this week, with Mohave 2 returning on Thursday. Mirant Corp.'s Pittsburg 1 and 2 plants (150 MW each) ramped down for repairs, and Duke Energy is still working on its Morro Bay 3 unit, leaving 337 MW off the grid.
Beginning 7:30 pm Thursday night, Energy Northwest began shutting down the 1,150 MW Columbia Generating Station to test and correct high-frequency vibrations in auxiliary diesel generator 1. The company has not estimated how long the plant will be out of service. Columbia had been operating at full capacity for 368 consecutive days, surpassing its previous record of 270 days set during the mid 1990s.
Real-time premiums at the Alberta hub in Canada flew to 469.04 mills for heavy-load hours, with off-peak prices soaring as high as 326.11 mills/KWh [Jason Mihos].
Oil, Weather Drive Gas Delirious
Spooked by a host of factors-low storage supplies, a blast of Arctic cold and spikes in the price of crude oil because of pre-war jitters-prices in the natural gas market nearly doubled at most Western points and in some cases surged even higher. NYMEX futures for March helped fuel the rise.
The phenomenal increases led federal energy regulators to announce they would investigate what caused the spike. On Wednesday, the Commodity Futures Trading Commission reported that it found no proof of price manipulation in NYMEX exchange trades this week.
According to California Energy Commission gas forecaster Bill Wood, an unexpected "arctic express" weather front swept across the country this week, accounting for some of the price pressure. "It looks like it's going to hang around for a while," Wood said, adding that stored gas is only at 30 percent of capacity.
Extraordinary though they were, daily prices in the West still managed to be lower than premiums elsewhere in the country. But the gains were eye-popping: Permian Basin prices bounded to $24/MMBtu, and gas at Topock traded for as much as $11/MMBtu. Prices at CityGate and Malin both cleared $10/MMBtu. San Juan gas missed the party somewhat but still traded higher than normal, rising to $8.95/MMBtu.
Supplies at the AECO hub barreled to a high of $9.62/MMBtu early in the week [J. M.].
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