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Western Price Survey

Week's End Edition
May 22, 2009
Power Prices Visit No Man's Land

With natural gas prices skidding along at historic lows, slack electricity demand on Memorial Day, and temperate weather, electricity prices predictably fell.

Natural gas prices, which had been propped up by glimmers of hope of an economic recovery, collapsed this week on a larger-than-expected increase in storage. On Thursday, Nymex natural gas prices notched their biggest percentage decline since Aug. 2007 of 9.2 percent to $3.60/MMBtu. On Friday, they fell even further to $3.51/MMBtu. Western spot prices, meanwhile, declined on average about 80 cents/MMBtu for the week.

Electricity trading this week has been compressed, with power for Tuesday delivery sold on Friday. On Thursday, electricity was traded in a flat 24-hour block for Sunday and Monday. The markets will be closed on Monday in observance of Memorial Day.

The mild weather crimped power demand this week, dropping peak usage from 36,200 MW on Monday to 32,600 MW on Thursday, the California Independent System Operator said. Friday demand was expected to fall by 300 MW.

For the week, daytime average California trades lost $9 to an average of $30.18/MWh at North of Path 15, and fell $10 at South of Path 15 to $28.52. Nighttime prices slid $2 lower to average $19.22/MWh in the north and more than $1 to $17.72 in the south.

Average Palo Verde peak prices declined $10 to $27.93/MWh, while off-peak trades fell $4 to $16.32.

In the Northwest, several media agencies reported rising river conditions caused by snowmelt and this week the Northwest saw low prices for off-peak power. At the California-Oregon border, off-peak trades dropped $3 to an average of $10.31/MWh. At Mid-Columbia, deliveries of nighttime power averaged around $9 Friday, though traded at a low this week of $5/MWh.

Meanwhile, working natural gas continued to find its way into storage. For the week ending May 15, mild weather boosted natural gas in storage nationwide by 103 Bcf to 2.116 Tcf, the U.S. Energy Information Administration reported. Storage is 32.1 percent higher than a year ago, 22.4 percent higher than the five-year average, and may be heading to an all-time record, according to analysts at the Federal Energy Regulatory Commission.

In the West, storage rose to 345 Bcf, up 13 Bcf, and stocks are now 56.8 percent greater than the same period last year, and 36.9 percent above the five-year average.

With falling prices and reduced demand, energy companies have dialed back the number of rigs they have in operation across the country since last summer. Operating natural gas rigs declined by 17 to 711 last week, according to the Houston oil-field service firm Baker Hughes. Rig counts have fallen consecutively for the last 25 weeks.

Falling rig counts helped to prop up natural gas prices by almost 40 percent through mid-May, but that support largely dissolved over the last week. Natural gas supplies continue to climb, besting analyst expectations and drillers' efforts to clamp down on drilling. A decline in supplies doesn't appear to be on the horizon for some time.

On Thursday, Pacific Gas & Electric's California Gas Transmission business unit asked shippers to limit natural gas supplies to match usage. Mild weather in much of the state will keep power and natural gas demand relatively low. The alert requires them to remain within 10 percent of their scheduled loads. Another alert is scheduled for Saturday and will carry a 5 percent tolerance level. PG&E's gas unit operates pipelines that carry the fuel from Canada, the Mountain West and other states to California.

In Arizona, the third 1,336 MW unit at the Palo Verde nuclear power plant has been turned off since early April for maintenance, and is not projected to return to full service until late June. The Diablo Canyon nuclear power plant reduced operations at its 1,130 MW second unit to 48 percent this week to remove plants and marine life from the ocean-water intake tunnels [Kristina Shevory].

Western Electricity Prices
Week's End: May 18 - 22, 2009
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 15-53.15 13.30-40.59
Mid-Columbia 17.50-30 5-21
COB 19-31 10-21.25
NP 15* 28.50-41 18.50-25.50
SP 15* 27.50-39.20 17-25
Palo Verde 27-39.50 15.50-25

* 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.

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 Chris Raphael, editor with questions regarding Price Survey Content.

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