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Western Price Survey / Archives

May 19, 2000
Are May's High Prices a Prelude to a Hot Future?

Energy prices were on average higher in all Western territories this week, but the market did not exhibit the spikes and bumps that were evident in recent weeks. Transmission congestion was virtually non- existent and even the unplanned outage at the Diablo Canyon nuclear facility and limits on output at the Columbia Generating Station did not by themselves cause a noticeable price run-up. That was mainly because prices were already high.

However, traders are saying that uncertainty about exactly when Diablo Canyon No. 1 will return to service is playing a role in what appear to be looming price run-ups next week.

Market prices were already at the high end when the week began, especially in the Pacific Northwest, where water managers are increasingly concerned about runoff projections and reservoir levels. Attempts to build storage in federal reservoirs meant to cutbacks on hydroelectric generation, and the Bonneville Power Administration not only pulled out of the daily sales market on Monday, it was reported as a heavy buyer of power from others.

The Columbia Generating Station limped along at less than half power most of the week after operators discovered that the main steam isolation valve has shut mysteriously. By Friday morning, the unit was moving back to 70 percent in "load following" mode, but the several days spent at 42 percent of capacity represented lost sales opportunities in a tight market.

Mid-Columbia power prices climbed to 53 mills/KWh for daytime deliveries and skirted 40 mills/KWh for overnights midweek before easing to 47 mills peak and 36 mills/KWh off-peak for Friday/Saturday trades. The California/Oregon Border price was close behind Mid-C's figures all week.

The California Power Exchange rose steadily through the week, with daytime clearing prices moving from 35 mills on Monday to 44.3 mills/KWh for Friday. Off-peak bounced around in the 31 mills to 33.7 mills range after starting out at 20 mills/KWh.

The Northern prices were frequently higher than those at Palo Verde, particularly by the end of the week, when Palo prices eased into the 40 mills to 43 mills range and Four Corners slipped to 38 mills to 45 mills./KWh. Southwestern off-peak prices remained in the 28 mills/KWh vicinity on light trading.

The high prices were good for some with extra energy to sell, particularly British Columbia exporters who report healthy storage. "At these prices, we'll keep selling as much as we can," said a Canadian marketer.

While not flush enough to greatly capitalize on excess sales at premium prices, some Northern California municipals pointed to their full reservoirs and projected steady runoff as keeping them out of the buyers' market. "Our hydro is in excellent condition," said one muni scheduler. We're heading into the summer with all reservoirs 100 percent full and we're still getting precipitation. We're in great shape."

Notable this week was the lack of price extremes in the PX congestion indexes, the day-of markets or the Cal-ISO imbalance energy market. In fact, traders reported that real-time prices tended to undercut the prescheduled market price.

Next week may present an entirely different pattern, although the theme of high prices is expected to continue. Brokers were already booking deals for 100 mill power at Palo Verde, citing a possible convergence of high gas prices, potential delays to Diablo Canyon's return, scheduled transmission work on the California/Oregon Intertie and hot weather stretching deep into California.

The unpredictable market is also fueling big jumps in futures contract prices at Palo Verde and COB. This week, the Palo Verde August contract jumped almost $15 to $98.75/MW and COB hit $82/MW. Both hubs saw September contract prices rise above $78/MW, indicating anxiety that the system may not be able to avoid serious summer disruptions.

Although veteran utility schedulers doubt there will be sustained prices at those levels, they also acknowledge that past trends may no longer apply.

"There is no normal anymore," said one trader [Arthur O'Donnell].

Big Spreads Mean Profit Taking for Gas Shippers

As natural gas prices screamed even higher this week, big disparities between basin, border and citygate prices provided arbitrage opportunities for gas shippers, but fiscal headaches for end-users. As an example of the huge spreads between locations late this week, traders pointed to San Juan Basin prices at $3.30 to $3.35/MMBtu, Permian Basin prices $0.20 higher at $3.50 to $3.56, but Southern California Border prices zooming up to $3.88/MMBtu-although the bulk of trades Thursday appeared to be at $3.76/MMBtu or so. Still, that figure was more than a half-buck higher than the $3.29/MMBtu SoCal Border price of Monday.

Similarly, in Northern markets, Malin was trading at $3.47/MMBtu but the deliveried PG&E CityGate price was up to $3.90/MMBtu, translating to a healthy profit for shippers buying at the border and taking interruptible space on the pipeline.

The opportunities were fleeting, however, and by late afternoon, pipes were getting so full that operators began trimming deliveries. The high inventory situation on the PGT pipeline was expected into next week.

"Power's strong and Diablo Canyon is down," was the market mantra.

The Alberta index price hike was almost as spectacular as the Southwestern pinnacles. beginning at about $(C)4.08/Gigajoule on Monday, the Canadian price rose to a high of $4.60/Gj before easing back to $4.48/Gj on Thursday [A. O'D.].

Western Electricity Prices
Week of May 15-19, 2000
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 20.5-84 12.5-25.6
California PX (WAC) 35-44.3 20.5-33.7
Mid-Columbia 42-53 36-40
COB 41-49.5 35-37
Palo Verde 40-50 28-29

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

The Western Price Survey is excerpted from Energy NewsData's comprehensive regional news services. See for yourself how NewsData reporters put events in an accurate and meaningful context -- request a sample of either or both California Energy Markets and Clearing Up.

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Contact Shauna O'Donnell, editor with questions regarding Price Survey Content.

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