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Western Price Survey

Week's End Edition
May 23, 2008
Prices Race to Bottom as Northwest Pays Others to Take Hydropower

The upcoming holiday weekend, cooler weather and especially a flood of cheap hydroelectricity in the Northwest drove down electricity prices sharply this week.

At some Western trading hubs, wholesale prices lost as much as half their value. In the Mid-Colombia region, hydropower had a negative average trading value Friday of about -$1/MWh. Some trades were for -$4/MWh.

According to Allen Burns, head of the bulk marketing group at the Bonneville Power Administration, some hydroelectric plants in the Northwest are paying people to take excess electricity because they have to release so much water in area reservoirs. It doesn't happen often and is expected to last for only a few days, said Burns.

Trading schedules were also unusual, as energy markets will be closed Monday in observance of Memorial Day. The market bought and sold power for Friday and Saturday deliveries on Wednesday. On Thursday, electricity for Sunday and Monday was traded; on Friday, Tuesday power was exchanged.

Also, late-week mild weather reduced California's demand from 41,000 MW on Monday to 28,400 MW on Friday. Electricity needs for the weekend were expected to remain below 29,000 MW.

The combination of low demand and the availability of excess hydropower seemed to dampen prices across the West. At the California-Oregon border, peak power prices tumbled $21 this week to close at an average of $55.48/MWh. Off-peak prices slumped $28 to an average of $15.93/MWh.

Prime trades at Mid-Columbia tumbled $32 to an average of $17.77/MWh. Off-peak prices shed so much ground they were in negative territory on Friday, with an average of -1.29/MWh.

Average daytime North and South of Path 15 power each shed $22 to around $75.81/MWh and $76.10/MWh, respectively. NP15 nighttime electricity lost $33 to an average of $31.73/MWh, while SP15 prices gave back $31 to end at an average of $33.49/MWh.

Palo Verde average peak values shot down $25 to $76.85/MWh, while off-peak trades clocked in at $26.14/MWh, down $30 [Kristina Shevory].

Western Natural Gas Prices Resist Crude-Oil Onslaught

Natural gas prices were closing in on $12/MMBtu Friday, boosted by soaring crude prices and the threat of hurricanes this summer. This week, futures prices rose 6 percent as oil shot past $133 a barrel on inventory worries.

But in the West, prices were mixed on cooler weather, power demand and a holiday trading schedule. The Permian, San Juan and Southern California Topock hubs all ended the week down in the mid-$8/MMBtu range. However, Malin and Pacific Gas & Electric's CityGate hub ended about 30 cents higher.

Oil analysts got a surprise this week when crude supplies tumbled by 5.4 million barrels on lower imports and an increase in refinery runs, the U.S. Energy Information Administration reported.

Another shock came Thursday when the International Energy Agency, a Paris-based energy adviser to 26 countries, said global oil supplies may be less than previously thought. For the first time ever, the IEA is in the midst of surveying the world's 400 biggest oil fields and said supplies are likely not enough to meet soaring global demand. The group's study will be released in November.

Crude prices have been skyrocketing this year as investors pile into the energy sector to hedge against inflation. A weak dollar has also aided oil's rise because the commodity is priced in dollars.

Natural gas in storage rose by 85 Bcf to 1.614 Tcf last week, which was less than usual because of the weather, the EIA said. The injection was 16 percent lower than last year and 7 percent less than the five-year average.

A smaller price spread between the Henry Hub spot price and winter prices also contributed to the smaller-than-expected addition. Industrial users won't place natural gas in storage for the winter if there isn't a significant price difference between current and future prices. In the West last week, storage hit 222 Bcf, up 12 Bcf, leaving supplies 25 percent lower than the same period last year and 12 percent less than the five-year average [K. S.].

Western Electricity Prices
Week's End: May 19 - 23, 2008
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 20.43 - 544.85 7.60 - 155.52
Mid-Columbia 16 - 79 -4 - 18.50
COB 52 - 90 10 - 49.50
NP 15 70 - 105.75 19 - 66
SP 15 69 - 106 18 - 66
Palo Verde 71 - 106 12 - 60.50

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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