Western Price Survey / Archives
May 11, 2001
An early arrival of summer-like weather across the Western region pushed California into two days of rotating outages early in the week. The accompanying high prices for energy spread throughout the West and at the highest point Wednesday, real-time energy went for as much as 1900 mills/KWh, according to the California Department of Water Resources.
Power traded at Palo Verde approached 600 mills/KWh midweek, and bilateral prices at other key hubs were not far behind. However, a cooling trend along the coast starting Wednesday afternoon brought significant easing of pressures and traders reported prices had fallen to about 355 mills to 375 mills/KWh at peak. Off-peak energy eased to the 210 mills to 220 mills/KWh range in California and lower in the Southwest.
"They did fall," said one trader in disbelief after watching the seeming never ending spike that started off the week.
Since power prices began the week in the 250 mills/KWh vicinity at most hubs, the resulting price spreads for the week will seem extreme.
While unseasonably hot weather-well over 100 degrees in desert areas all week and more than 93 degrees in usually cool San Francisco Bay Area on Monday-was the main driver, the market also saw a bad luck combination of transmission trips, generation outages and financial skittishness on the part of sellers to California. Each day presented a new challenge to grid operators and Jim McIntosh, operations director for the California Independent System Operator said that Monday was the worst day he had seen in nearly 20 years of operations experience. "We are completely dependent on imports," he said.
The worst part about it is that this week may be just a dress rehearsal for many more such weeks to come this summer.
At the high point Wednesday, Mid-Columbia, California/Oregon Border and NP15 hit 560 mills to 580 mills/KWh but eased to 355 mills/KWh for weekend trades. Off-peak power dropping to 220 mills/KWh from a high of 270 mills/KWh midweek.
Palo Verde had the most dynamic pricing of the bunch, rising to 595 mills at peak then falling all the way to 370 mills/KWh. Off-peak power was 135 mills to 160 mills/KWh.
Traders expect another tough week to come; prices for Monday were rising to about 425 mills/KWh at Palo Verde and 390 mills/KWh at COB [Arthur O'Donnell].
Gas Dives Everywhere Except, You Know Where, Topock
"There's no buyers out there," lamented one gas seller late in the week. "It must be because all the generation units are down."
While electricity markets were having a full moon attack, gas prices generally trended downward. That is, except for at the SoCal Border where the continuing $12-plus prices were easily $5 to $6/MMBtu higher than at other gateways to California.
The Southwestern basins were even lower, with San Juan falling to $3.65/MMBtu and Permian barely holding on to the $4/MMBtu mark late in the week.
In Northern California, the SF CityGate collapsed to $4.40/MMBtu on Thursday, as PG&E pipelines were stuffed with supply and no takers. Storage injection was at its limit and the utility called a customer- specific operational flow order to try to balance things out.
Malin also fell sharply from $6 to $4.66/MMBtu.
Even expected weekend maintenance at Station 14 that will cut 170,000 MMBtu of delivery on the PGT pipeline is not expected to boost prices much, traders said.
Storage injections were reported higher than projected across the United States, contributing to a softening of prices at national hubs. Western injection increased by 14 Bcf, bringing reserves up to 41 percent of capacity-which is actually welcome news given how dry things were just a few weeks ago.
In Alberta, prices dropped from $(C)5.84/Gigajoule to $5.64/Gj [A. O'D.].
Dueces and a Pair of Threes Not a Good Hand for Cal-ISO
"It was just a week that was very unpredictable," sighed California Independent System Operator spokesperson Stephanie McCorkle. "Just when we thought we knew which way temperatures were going to go, it changed." The hot weather lasted longer and produced record high temperatures for so early in the season, she said. "Mother Nature just didn't show us mercy until [Wednesday] afternoon."
Along the way, Californians endured two days of Stage Three rotating outages and a full slate of Stage Two alerts, signaling the first crisis of what is expected to be a continuing spring/summer emergency.
Cal-ISO got a rude surprise Monday morning, when British Columbia Hydro's PowerEx affiliate cut back nearly 1,000 MW of energy that had been scheduled into California because the Department of Water Resources had nearly reached its credit limit for energy purchase made over the weekend. The state agency quickly wired a payment, and PowerEx resumed sales just in time for Cal-ISO to avert rotating outages at noon.
It was still touch-and-go the rest of the day, and Cal-ISO requested that utilities pull in whatever load-shedding they could. By about 3:30 pm Monday, Cal-ISO thought it was out of the woods and allowed all interruptible blocks to resume service. However, the resulting spike in power use along with a cresting wave of record high temperatures sent the state over the edge, and 300 MW of rotating outage blocks were effected beginning 4:15 pm through about 6 pm.
Tuesday's Stage Three event was triggered by transmission line problems out of BC rather than financial concerns. The net effect was the same with a loss of between 600 MW and 1,000 MW flowing south on the intertie. The weather was still hot-well over 100 degrees in the desert and Southwest-and consumers turned to air conditioning early in the day.
Calls for conservation, use of voluntary curtailments and-beginning at 3:15 pm another Stage Three declaration requiring 400 MW of load cuts- helped Cal-ISO meet load. The final peak figure of 34,048 MW Tuesday came in well below the 35,861 MW forecast, but that included the rotating outages and customer curtailments, so Cal-ISO was not boasting.
Things got a little easier on Wednesday and Thursday, as peak loads came in under revised forecasts and the worst the situation got was Stage Two status.
Compounding the week's resource squeeze were the continuing outages of nearly 13,000 MW of generation, including units at all three major Western nuclear power facilities, plus a scheduled reduction in output from the Columbia Generating Station in Washington. Some big units lost during the week included a 700 MW Pittsburg No. 7 and a 245 MW curtailment at Moss Landing No. 7, although the 337 MW El Segundo No. 3 was able to get back on line midweek.
Pacific Gas & Electric also reported that nearly all of its qualifying facility power was back in operation this week, with just 109 MW out of 2,500 MW of QF projects still out for economic reasons.
The first seasonal test of a revamped customer curtailment program managed to recruit between 800 MW and 900 MW of voluntary cutbacks, mainly in Southern California Edison territory. That was a welcome response given that curtailment program participation had dropped substantially because customers had been called too many times early in the year, and regulators temporarily had suspended penalties for noncompliance prior to revamping the programs. During the past Stage Three in mid-March, utilities could muster only 200 MW to 300 MW of voluntary cuts, and the latest word on program participation indicates at least 30 percent attrition from last year.
There was no tally of a price tag for the emergency week, but at its worst, the state had to pay as much as $1,900/MWh for real-time energy, said Oscar Hidalgo, spokesperson for the Department of Water Resources. On Wednesday, DWR had to buy 168 MWh at that top price-more than three times the high prescheduled price in Western markets-and kissed $319,000 goodbye [A. O'D.].
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