Western Price Survey / Archives
March 8, 2002
Energy markets entered March with a roar this week, and while prices came down a little, they reached higher than they had been so far in 2002.
A wide variety of factors conspired to drive peak prices above 40 mills/KWh in the Pacific Northwest and into the high-30s elsewhere. As the market headed into the weekend though, pressures eased but the main driver appeared to be a sustained hike in natural gas costs across the West. The high gas prices and a blanket of cold weather on Friday built a floor under the power prices despite moderating demand.
A big burst of precipitation in California and the Northwest heralded late-winter snows in the mountains, and system planners breathed a sigh of relief. A dryer than normal February and the prior week of snow- melting warm temperatures had begun to raise concerns that there might be insufficient runoff later this spring.
"It's not going to be a wet year," observed one trader. Mainly people are hoping for a return to normal rain and runoff figures.
Water managers in the Northwest were still wary, and appeared to be shifting hydroelectric production into daytime periods to capture higher margins, while letting gas set the prices at night. That, and a big load of coal-fired unit outages across the West seemed to account for off-peak prices above 30 mills/KWh in the Northwest.
The high prices for the week were set early, as traders came off a weekend marked by unusually volatile real-time prices, and uncertainty about cold weather forecasts and unit outages. When California grid operators mistakenly left the 1,080 MW San Onofre No. 3 unit on Mondays' generation outage list-even though it was already reconnected and supplying above 90 percent of its capacity-there was worry that reserve margins might be tapped.
California loads crept down from the 29,900 MW level midweek, with Cal-ISO projecting a low 28,000 MW peak for Friday. Northwest demand were stronger this week on heating loads but reserve margins were still reportedly in the double-digits, according to the Western Systems Coordinating Council. Even bigger reserve cushions were reported for the Rocky Mountain/Desert Southwest.
California prices bumped up to 37.5 mills/KWh, while the California/Oregon Border approached 40 mils in sympathy with Mid-Columbia, which peaked at 42 mills/KWh on Monday. Palo Verde lagged in the 34 mills to 36 mills/KWh range until midweek.
Various transmission maintenance outages and deratings also contributed to the sense that power might not be readily available-although most of the cuts were planned well in advance.
The Pacific DC Intertie varied between 1,700 MW and 2,576 MW in north-to-south transfer capacity. The California/Oregon Intertie was limited to 3360 MW going south and 2450 MW heading north because of seasonal work on the Grizzly/Captain Jack 500 KV line. In the Southwest, the Intermountain/Adalanto 500 KV line was trimmed to 1,200 MW as well.
Going into the weekend, prices Mid-Columbia showed 33.5 mills to 35 mills for peak power and 32 mills/KWh for off-peak. COB was from 34 mills to 35 mills/KWh, with off-peak holding at 30 mills/KWh. NP15 covered a wider spread from 32 mills to 35 mills for peak but sat at 28 mills/KWh for overnight energy.
SP15 broke from NP15 earlier in the week then gravitated to 34 mills at peak and 26.5 mills to 27 mills/KWh for off-peak. Palo Verde bounced up a little from its bottom price of 29 mills to the 30 mills to 31.5 mills/KWh bracket. Off-peak was a relative bargain at 24.5 mills/KWh in the desert [Arthur O'Donnell].
Gas Prices Bounce Higher
Day to day changes in natural gas prices were hard to keep up with this week. Just when it seemed that prices in the West were settling down following a strong start, they shot up by as much as $0.25/MMBtu at domestic hubs and crossed the $4/Gigajoule line in Alberta.
Increased demand for gas by power plants to make up for missing coal units and slack hydro generation combined with heating load in the Northwest and mountain regions. An extreme chill across the upper Midwest also seemed to pull Canadian supplies, which helped explain the Alberta run up.
Traders were unsure of longer term prospects for sustained pricing-forward contracts fell and rose each day with no clear direction and conflicting rationales offered by market observers. Some believe that production levels may be cut going forward and demand will rise. Others look to still-healthy storage levels as providing a cushion of supply that will cap prices in months ahead.
On Thursday, the bulls were directing the market, however and prices screamed higher after the daily trading was over. SoCal Border prices rose to $2.83, while the gathering basins neared $2.60/MMBtu. Malin hit $2.73/MMBtu while the SF CityGate climbed to $2.78/MMBtu at the top of the market.
Alberta reached $4.18/Gj but then settled to $3.96/Gj- still $0.50/Gj higher than where it had been on Wednesday [A. O'D.].
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