Western Price Survey
Week's End Edition
A heat wave across the West pumped up electricity prices despite falling natural gas values.
Western spot natural gas prices fell in the range of 20 to 40 cents/MMBtu this week. But electricity traders looked to forecasts of blistering heat, with weekend temperatures exceeding three digits in California's Central Valley, the mid-80s in Los Angeles, and the high 70s in San Francisco.
In California, daytime prices rose nearly $8 since Monday to an average of $45.27/MWh at North of Path 15. South of Path 15 power, meanwhile, gained $5 to $46.11, with much of the gain coming in Friday trading. Nighttime trades skyrocketed $11 to $36.18/MWh in the north, and $34.83/MWh in the south.
Prices, however, are depressed relative to the same period last year, when SP15 and NP15 traded in the $100/MWh range. Not surprisingly, natural gas was trading in the $10/MMBtu range then as opposed to the $3 to $4 range it has been trading for much of this year, a result of the recession.
On Monday, peak electricity demand hit 30,800 MW and fell to 30,400 MW on Wednesday before rising to 31,900 MW on Thursday, the California Independent System Operator said. A blast of hot weather was expected to pump up demand to 32,600 MW on Friday and 35,500 MW on Sunday. Demand should fall early next week, though, as temperatures begin to recede.
A dome of high pressure over the Desert Southwest has kept temperatures above 100°F for the last week. Palo Verde peak values were $2 higher over the week to $45.80/MWh on Friday. Off-peak prices added $7 to average $32.09.
Average Mid-Columbia prime trades closed at $35.54/MWh for an increase of $6 for the week. Off-prime values added $9 to average $29.95. During the same period last year, peak power prices were in the $80/MWh range at Mid-C and didn't begin to fall until hydro runoff kicked in at the end of May.
Meanwhile, daytime California-Oregon border power rose $7 this week to average $38.32/MWh, while nighttime deliveries gained $9 to $31.04.
Stored natural gas climbed 95 Bcf to 2 Tcf last week, making it the third time in 15 years that supplies have exceeded 2 Tcf, the U.S. Energy Information Administration reported. For the eighth week in a row, industrial users have injected natural gas into storage rather than withdrawing any supplies. Compared to the same period last year, there is 32.8 percent more natural gas in storage across the country, and reserves are 22.8 percent higher than the five-year average.
The West is especially well-stocked -- inventories rose by 13 Bcf to 332 Bcf for the week ended Friday, May 8, leaving them 59.6 percent higher than a year ago and 38.3 percent greater than the five-year average.
Looking ahead: This summer, California should have plenty of power to keep residents cool thanks to new generating sources and a recession-led drop in demand. But even with a dry summer and an estimated 1,000 MW drop in hydropower, the loss will be made up by imported power and new generation (see story in this week's CEM at [13.1]).
Nationally, as consumers cut back their spending and factories reduce output to compensate, natural gas usage is expected to plummet by 1.9 percent this year, the EIA said. The drop is largely driven by an 8 percent dip in industrial consumption.
Henry Hub spot prices are projected to plunge from an average of $9.13/Mcf in 2008 to $4.06/Mcf this year. As the economy improves in 2010, natural gas prices are expected to recover to about $5.21/Mcf.
And thanks to the demand drop and storage overhang, inventories nationwide are projected to touch 3.635 Tcf by the end of October, blasting past the previous record of 3.565 in October 2007.
The EIA predicted total electricity consumption will decline by 0.8 percent this year, but increase 1.5 percent next year. Lower demand, however, won't trim residential electricity prices. This year, prices are estimated to climb by 4.4 percent thanks to the increased expenses of building new generation and transmission lines [Kristina Shevory].
* 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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