Western Price Survey
Week's End Edition
Since last year, power prices have come a long way -- down.
This week natural gas traded in the $3/MMBtu range in the West, and peak electricity flirted with $30/MWh most of the week. During the same week last year, natural gas traded well above $9/MMBtu at Western hubs. Power prices in the region, accordingly, went for three times today's value, trading in the neighborhood of $90/MWh.
But there's a problem with plotting electricity values solely as a function of the vagaries of natural gas, even in the methane-dependent West.
Electricity and natural gas, for instance, are subject to their own influences of supply and demand. This week, Western electricity prices defied a natural gas market that is nearly comatose.
Natural gas prices at Western hubs fell for the week, losing around 8 cents/MMBtu on average at Malin, 10 cents at the Southern California border, and 16 to 17 cents at El Paso's Permian and San Juan basins. The PG&E CityGate price dropped about 13 cents, finishing Friday at $3.33/MMBtu.
And yet, power prices rose. The big gains were booked Friday in California. North of Path 15 peak electricity, for instance, which had been trading between $27 and $29/MWh most of the week, vaulted to an average of $36/MWh. Off-hours power picked up around $4 in Friday trading and went for an average of $24.78. South of Path 15 prices were generally $1-$2 off northern values (see chart).
Electricity prices normally rise a bit on Friday since traders anticipate more electricity use on Monday. A hot-weather forecast for California, however, likely exacerbated the rise in power prices traded Friday. The California Independent System Operator reported peak demand early in the week of 28,495 MW; demand was expected to fall below 27,000 MW Friday. The peak demand forecast for Monday, however, is 33,519 MW.
Not surprisingly, Los Angeles is expected to see high temperatures of 85 degrees then, while even San Francisco approaches 80 degrees. In other words: air-conditioner time.
A prime example of this pattern is Palo Verde, which is supposed to bake at a high of 102 degrees on Monday. Consequently, peak power picked up $8/MWh on average in Friday trading, reaching the highest mark in the West this week, at $41.50/MWh. Nighttime prices, however, kept in line with cooler evening temperatures in the desert and rose only $2, going for a high of $23/MWh.
Another wrinkle in gas-power price synchronicity is the spring runoff. Last year's runoff produced extreme negative prices, in effect forcing the Bonneville Power Administration to pay others to take hydropower, even as natural gas in the West traded above $10/MMBtu. This year's runoff will likely be less severe than last year's. Last week the U.S. Northwest River Forecast Center predicted that water runoff at the Dalles Dam on the Columbia River, a key measure of power production in the Northwest, would be at 88 percent of the historical average. Last year runoff was about 99 percent of the 30-year average.
This week, Mid-Columbia nighttime power went as low as $14.25/MWh on Monday; prices at the hub have not been that low since the runoff period that began around May of last year. By the end of the week, off-peak power in the area had picked up $2 on average and was trading around $18.86/MWh, but that was still the lowest price in the West.
Mid-C peak power picked up a few dollars on Friday -- even the Northwest will have warmer temperatures starting Monday, with Seattle poking above 70 degrees. Off-peak California-Oregon border prices gained about $3/MWh this week, while prime power in the hub picked up around $6, most of it on Friday.
The natural gas markets continue on a downward slope. Approximately 21 Bcf of gas went into storage last week, the U.S. Energy Information Administration reported. Working gas in storage is 22.5 percent above the five-year average and 34.8 percent above last year's levels. In addition, the number of rigs drilling for natural gas fell to 760, Houston-based firm Baker Hughes reported, the lowest level since 2003-2004. Last April, more than 1,400 rigs were exploring for natural gas [Chris Raphael].
* Includes day-ahead locational marginal prices (financial swaps) and quasi-swap prices for these hubs.
Archives of the Western Price Survey for the past year are also available online.
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