Western Price Survey
Week's End Edition
Western power markets ended this week with lower prices at most hubs, with the biggest drops occurring in the Northwest. Prices for peak power at Mid-Columbia ended the week down about $5.25/MWh relative to the start of the week. The high price Friday only reached $41/MWh.
Meanwhile, the California-Oregon border ended the week down $4.25/MWh at about $43.50. Palo Verde showed the least change, ending the week at $45.25, just 25 cents lower than Monday's start.
Not unsurprisingly, natural gas prices at most Western markets fell between 3 and 6 percent during the week ending Wednesday, according to the U.S. Energy Information Administration. But temperatures were 2 to 8 degrees below normal, likely contributing to an increase in demand that prevented prices from dropping further. Spot prices at Western hubs tended to dip a few cents more by Friday (see chart for range).
Meanwhile, Enerfax reports that natural-gas futures contracts have fallen 10 percent in the last two weeks. Futures for April gas delivery settled Friday at $4.44/MMBtu after the EIA released its weekly storage report. Natural gas storage remains high across the West. At 289 Bcf last week, storage levels are 23.5 percent above the five year average. The U.S., especially the West, remains flush with natural gas supplies and will likely stay that way at least through the end of 2010 and perhaps beyond, according to Natural Gas Week. Despite relatively high storage levels and low prices, producers continue to drill, partly because of lease obligations which commit them to continue drilling. The greatest uncertainty facing natural gas markets right now is the economy, specifically debt, deficits and derivatives, NGW reported. Further instability in equities could cause demand to keep falling.
The National Weather Service and Accuweather.com forecasts for the week ending March 20 predict temperatures will stay above average across the West. Los Angeles is looking at temperatures well above normal in the upper 70s all next week. San Francisco can expect temperatures in the low to mid-60s, slightly above normal. Seattle's forecast actually uses the word "dreary" as precipitation returns to normal for this time of year.
On the bright side, rain is bringing sorely needed dollars to the hydro system, which has been facing reduced revenue forecasts from low water conditions. And throughout the West, the wet weather, which this time of year can still translate into increased snowpack in the mountains, should somewhat improve the summer power-supply outlook.
The region is not completely clear of a potential storm in power markets this summer, as recent rains are not likely to bring reservoirs up to normal levels. Above-average temperatures combined with rapid economic growth could still cause significant price uncertainty later in the year.
Briefly looking at long-term trends, EIA's Short-Term Energy Outlook released Tuesday reveals a slight increase in the national average retail price of electricity in 2009 to 9.9 cents/kWh, which is expected to hold steady through 2011. The U.S. Pacific Region, largely dominated by California, increases very slowly from 11.3 cents/kWh in 2009 to 11.4 cents/kWh in 2010 and 11.5 cents/kWh in 2011 [Stacey Waterman-Hoey].
* Prices represent both day-ahead locational marginal prices (financial swaps, or EZ Gen DA LMPs) and quasi-swap prices (EZ Gen) as reported by ICE.
Archives of the Western Price Survey for the past year are also available online.
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