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Western Price Survey

March 3, 2006
Palo Verde Unit Fix Now Slated for April

It looks like owners of the Palo Verde nuclear power plant must face the painful realization that their procurement costs, which have increased because of the derate of the No. 1 unit at the plant, will continue to be elevated into the foreseeable future. While Arizona Public Service had planned to try to fix a pipe vibration problem with the unit in February, the company cancelled those plans because further assessment of the issue led plant operators to conclude the proposed fix would not clear up the problem.

PV Unit No. 1 has been operating at just 25 percent of its 1,122 MW capacity for close to two months because of the vibration difficulty that started after the plant's steam generators were replaced. APS is now targeting April for when they will try to eliminate the vibration. That utility alone has send the derate of Unit No. 1 is costing it at least $7 million every month it operates at one quarter of its capacity.

Peak-power values north of Path 15 broke into the fifties at the start of this week, but quickly settled into the 47 mills to 48.50 mills/KWh range. A slight boost in prices was recorded on Friday, when trading closed at a high of 50.25 mills/KWh. Off-peak power attracted between 40.25 mills and 45 mills/KWh on Monday, but slipped all the way down to a low of 34 mills/KWh later in the week.

Prices for power south of Path 15 fared not much better in the first half of the week. After hitting a high of 54 mills/KWh on Monday, the cost of daytime power in Southern California dropped down to between 47.75 mills and 49 mills/KWh during Wednesday's trading session. SP15 nighttime power attracted between 41 mills and 46 mills/KWh on Monday before sloughing off as much as 10 mills to close out Wednesday's session between 35 mills and 38.50 mills/KWh.

Power scheduled for peak-time delivery at the Northwest hub at Mid-Columbia changed hands for a high of 47 mills/KWh on Monday, before shedding a few mills the following day. The price bottomed out at 40.25 mills/KWh on Thursday before moving back up to 46 mills/KWh to close out the week.

Off-peak power kept pace with daytime deliveries at Mid-C this week. After trading for between 44.25 mills and 45.50 mills/KWh at the start of the week, off-peak power drew between 41 mills and 42.25 mills/KWh on Wednesday. The price rose back up to 44 mills/KWh on Friday.

Palo Verde peak-time power attracted between 50 mills and 51 mills/KWh at the start of the week, but the price sagged down to a range of 43.25 mills to 45.50 mills/KWh on Thursday. Low demand also exerted downward pressure on off-peak power prices at the hub. After recording a high of 44 mills/KWh on Monday, the price of off-peak power at PV fell to a low of 33.75 mills/KWh during Wednesday trading.

In other Nevada news, Sempra Energy is downsizing Granite Fox, the coal-fired power plant planned north of Reno, Nevada.

"We're further revising the size and scope of the project," said Sempra spokesperson Art Larson.

The company originally proposed a 1,450 MW, coal-fired project near Gerlach, Nevada, but it reduced the size to 1,200 MW in November. Now, the facility would be even smaller, although the company did not say how much it would shrink the project.

The market that Granite Fox would serve also is getting smaller. Larson noted that Sierra Pacific Power of Reno and Nevada Power in January announced plans to build the Ely Energy Center, a 1,500 MW, coal-fired plant near Ely, and would therefore have less need for electricity from Granite Fox.

That was not the first indication that the Nevada utilities were unlikely customers, however. Roberto Denis, senior vice president of the utilities' parent, Sierra Pacific Resources, in June said the utilities were not interested in buying power from the Sempra plant. Denis said California was the main market for Granite Fox.

In California, regulations are making it harder for investor-owned utilities to enter contracts to buy power from coal-fired power plants. The California Energy Commission in November proposed prohibiting IOUs from entering into long-term contracts for power from plants that generate more carbon dioxide than conventional natural gas-fired plants. In December, the California Public Utilities Commission adopted a rule that requires utilities to consider cleaner power sources more cost-effective if they prevent carbon emissions for less than $8 to $25 per ton.

Those developments restrict two of Granite Fox's three key markets--Nevada, Southern California and the Pacific Northwest, Larson observed.

Sempra also has disclosed discussions with unidentified companies interested in investing in Granite Fox.

The project generated intense opposition from environmental groups from the beginning, unlike the Ely Energy Center, which is supported by Ely business interests hoping for economic development.

Reducing the plant size would cut down on the quantity of water the plant consumes, however, and limited water resources have been one concern cited by opponents of Granite Fox [Shauna O'Donnell and John Edwards].

Get Your $5 Gas Here!

The seemingly bygone era of $5 natural gas is here again. Yes, folks, the price of wholesale gas on the Western spot markets--both at the producing basins and at receipt points--spent most of the week at levels that a few short months ago appeared to be long gone.

San Juan Basin and Permian Basin gas came close to falling through to the $4 range on Wednesday, when the price at those two sites hit $5.11 and $5.10/MMBtu, respectively. Even Pacific Gas & Electric CityGate gas managed to go as low as $5.79/MMBtu at midweek after opening on Monday trading for between $6.30 and $6.37/MMBtu.

With the winter heating season on its way out the door and a continuing surfeit of natural gas in the nation's underground storage facilities, this week saw losses more frequently than gains.

Southern California border gas delivered at Topock traded at a high of $6.195/MMBtu on Monday before slipping down to between $5.32 and $5.80/MMBtu at midweek. The low end managed to gain another dime in late-week trading, but the high end was not able to exceed $5.61/MMBtu [S. O'D.].

Western Electricity Prices
February 27 - March 3, 2006
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 22.43-102.87 7.56-49.46
Mid-Columbia 40.25-47 40-45.50
COB 43.50-49.25 40-45
NP 15 45.75-53 34-45
SP 15 46-54 35-46
Palo Verde 43.25-51 33.75-44

Archives of the Western Price Survey for the past year are also available online.


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