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Western Price Survey

Week's End Edition
March 6, 2009
Power, Natural Gas Prices Keep Low

Power prices perked up this week across the West and added as much as $5/MWh, even though natural gas prices floundered and the economy slipped into an even deeper funk. This week, the Dow Jones industrial average tumbled under 7,000 -- the first time since 1997 -- and unemployment touched 8.1 percent, the highest in nearly three decades.

Western natural gas prices showed little direction, with some rising and others remaining flat or falling, but all prices moved less than 20 cents/MMBtu in either direction. Average prices closed out the week at a range from $2.72/MMBtu at the Permian Basin to $4.09/MMBtu at Pacific Gas & Electric's CityGate.

The recession, a supply glut and lower industrial demand have combined to keep prices lower than they otherwise would be during winter. About a third of the country's demand for natural gas is driven by businesses, but a relentless series of layoffs and plant shutdowns have trimmed much of industrial demand.

The economic spiral has taken the usual lift natural gas prices receive from cold weather. Even as the East Coast was pelted with heavy snowstorms this week, natural gas futures on Nymex remain low and traded below $4/MMBtu on Friday. Nymex natural gas prices are down about 70 percent since their peak last July.

Lower gas prices help consumers though they tend to hurt some power generators. Edison International reported this week that the low commodities prices will dig into its earnings this year at Edison Mission Group, its power-generation subsidiary, and expects EMG to book about half of its per-share earnings compared to levels in 2007 and 2008 (see story at [17]).

With less demand and natural gas to spare, the number of natural gas drilling rigs operating across the country finally slumped below 1,000 for the week ending Feb. 27, the first time in over four years, the U.S. Energy Information Administration said. There are 32 percent fewer rigs in operation than the same time last year. Drilling rigs have been gradually shutting down since September even though prices started slipping in August. There is usually a lag between a price drop and rig declines.

Natural gas in storage tumbled 102 Bcf to 1.793 Tcf last week, yet supply levels remain 17.7 percent higher than a year-ago and 13.8 percent above the five-year average, the EIA said. In the West, where temperatures were milder than the East, 4 Bcf was taken from storage. At 292 Bcf, inventories are 52.9 percent higher than a year-ago and 35.8 percent above the five-year average.

Rain is back in the forecast for the Northwest starting Friday night. Temperatures will be in the mid 40s in Seattle and high 40s in Portland. Cold air coming south from Canada will push snow, which has been falling in the Cascades, to the lower elevations of Seattle and Portland Saturday night, AccuWeather said.

From Monday to Friday, at the California-Oregon border, peak prices added over $2 to average $35.87/MWh. Average off-peak prices were up over $4 to $32.69. Mid-Columbia prices ended up nearly identical (see chart).

California, however, will be missing the next round of snow and rain that hits the Northwest. In San Francisco and Los Angeles, there will be sunny skies and temperatures in the high 50s and mid 60s, respectively. Phoenix will be sunny, with a high of 72 degrees Fahrenheit.

This week, power demand rose to 29,900 MW on Wednesday but ebbed to 29,700 MW on Thursday and was scheduled to fall to 29,300 MW on Friday and 28,600 MW by Sunday.

Since Monday, California average daytime power prices rose nearly $2 to $35.96/MWh at North of Path 15 and over $4 to $35.23/MWh at South of Path 15. Nighttime trades in the north were off 17 cents to average $29.09/MWh, but shot up $5 to $25.51/MWh in the south.

Average Palo Verde prime power added $2 to $30.03/MWh, and over $4 to $22.55/MWh for nighttime deliveries.

The San Onofre Nuclear Generating Station's 1,070 MW second unit is at 97 percent capacity this week after maintenance was completed. Diablo Canyon's first 1,138 MW unit remains closed while its fuel and four steam generators are replaced. The process is supposed to take a few months; the unit has been offline for well over a month [Kristina Shevory].

Western Electricity Prices
Week's End: March 2 - 6, 2009
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 12.85-67.95 13.38-60.93
Mid-Columbia 30.25-37.50 25.25-34.50
COB 32.50-36.50 26.25-33.50
NP 15 32.75-43 27-30.50
SP 15 29-39 19.50-26.50
Palo Verde 26.75-34 16.75-24.95

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


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