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Western Price Survey / Archives

April 19, 2002
Power Market Tanks on Hydro Flows

Western power prices took a dive off the springboard of increased hydroelectricity, with prescheduled prices in the Pacific Northwest dropping to single digit levels heading into the weekend. A disconnect between the Northwest and California-a result of transmission limits and fuel-stock differentials-meant big disparities in prices although the overall trend was downward no matter where one looked.

In an operational sense, this week the marginal resource was shifting from gas to water in the north and from coal to nuclear in the south. Inside California prices were still propped up somewhat by natural gas costs, but the undertow of hydro was starting to pull those hubs downward as well.

The market was disjointed in another way. The first half of the week saw prices set during Monday's trading to allow Northwest Power Pool schedulers to meet for their semiannual gathering. When the traders and schedulers returned on Thursday, everything had changed. "There's water everywhere," remarked one market participant.

Because of the need to minimize the buildup of nitrogen levels that can be fatal to Columbia River fish, water managers signed off on much higher levels of hydroelectric generation. But since much of the excess could not find its way out of the region, it forced Mid-Columbia prices to their lowest marks since June 1999. Anyone with storage capacity this week was able to buy at bargain rates, back off their own generation and fill sales commitments with the cheap hydro. Bonneville Power Administration upped its daily offer to 300 MW day or night and asked the Columbia Generating Station to back down to 65 percent of output in an "economic dispatch" regime.

The apparent stagnation of reported prices for Monday through Wednesday masked a great deal of turmoil caused by a fire at the Sylmar terminus of the Pacific DC Intertie. Transmission paths between California and Oregon had already been limited for maintenance or to allow Northern California hydro freer passage, when the fires at Sylmar's converter station No. 4 forced grid operators to cut available capacity by half-to just 1,100 MW.

To accommodate schedule cuts and "over generation" problems that resulted, Cal-ISO had to issue a series of operational notices and change available capacity on the AC portion of the Intertie.

The resulting chaos was termed "8 hours of real-time hell" by one scheduler, but things were pretty much back to normal by Tuesday.

Prices on real-time markets midweek foreshadowed the spiral and were confirmed as traders put together their Friday/Saturday packages. Mid-Columbia daytime power was between 10 mills and 14 mills/KWh while off- peak energy dropped to the 5.75 mills to 8 mills/KWh range. The California/Oregon Border price moved down to 18 mills to 20 mills/KWh at peak and about 12.5 mills/KWh off-peak.

NP15 and SP15 began the day at 29 mills but slipped to about 23 mills/KWh for peak power. Overnight energy was seen at 11 mills to 12 mills at NP15 and 10.5 mills to 13.5 mills/KWh for SP15.

Palo Verde, though far from the water supply, felt the impending return of Palo Verde No. 2 after a month- long refueling outage. The PV price dropped from 29.5 mills to 22.25 mills/KWh during Thursday's trading, and off-peak energy continued eroding to about 12 mills/KWh.

The 1,270 MW nuclear facility reconnected to the grid midweek and was expected back to full capacity by the weekend. It more than made up for the sporadic operations at Four Corners No. 5, which since Sunday had been having tube leak problems. The sudden loss of the 758 MW unit caused some concern for Nevada Power on April 14, pushing the utility into a "yellow alert" on worries that it might not be able to maintain reserve margins during peak hours [Arthur O'Donnell].

Gas Prices Try to Hold On

"All of a sudden it's summer season," observed a Southwestern energy trader this week. That translates to a big shift in resources throughout the West and-at least for the time being-reduced reliance on natural gas. Western storage has moved into injection mode, with about 6 Bcf put into the ground regionally-that was more than half of the net 10 Bcf injection reported across the US.

The spring runoff and the return of the Palo Verde No. 2 nuclear unit also played a role in capping Western gas prices. Although national benchmarks tried to establish a rally on Thursday, Western gas prices moved in reverse-with a potential further erosion heading into next week as the effects of excess hydroelectricity spread through the region.

The San Juan Basin led the retreat, dropping to $2.20/MMBtu from a week's high of $3.03/MMBtu. The San Juan region is still weak from spring maintenance restrictions and there was a discernable spread between its prices and the Permian Basin. Texas gas held in the $3.11 to $3.28/MMBtu range.

The Southern California Border and the San Francisco CityGate vibrated in harmony in the $3.25 to $3.40/MMBtu range and Malin trailed at $3.12 to $3.23/MMBtu. Alberta remained relatively high, peaking at $(C)4.45/Gigajoule although trading volumes were next to nil [A. O'D.].

Western Electricity Prices
Week of April 15-19, 2002
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 34-60 10.5-46
Mid-Columbia 18-25 12.5-17
COB 23-32 11-20
NP 15 23-32 11-20
SP 15 23.25-33.75 10.5-20
Palo Verde 22.25-32.25 12.5-18

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


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