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Western Price Survey

Week's End Edition
May 25, 2012
Power Prices Should Stay Low This Summer, but Maybe Not in SoCal

Western power prices remain low as the spring runoff continues and could decline even further this summer.

In comparing forward power prices as of May 1 with last year's forward prices, FERC found "market participants expect lower prices than a year ago."

In a summer assessment released May 17, the agency states electricity forwards, compared to forwards last year at this time, have dropped 21 percent to $31.62/MWh at Mid-Columbia. Forwards have dropped 18 percent to $38.50/MWh at South of Path 15 and 18 percent to $34.75/MWh at Palo Verde.

Despite the drop in forward prices at SP15, FERC stated that Southern California may see increased price volatility this summer and higher prices with the ongoing outage of the San Onofre Nuclear Generating Station. "With the region reliant on imports, the removal of the two SONGS units means the region will need to rely on plants with higher costs," the assessment stated. "Greater price volatility typically occurs under such situations."

The assessment also called for "close attention" to grid operations and prices this summer if the two SONGS units remain off line.

Ahead of the Memorial Day holiday, most peak prices for spot power in the West fell a couple of dollars on average in the May 18 to May 25 trading period. Palo Verde led the drop, losing about $2.10/MWh to roughly $28.60. California-Oregon Border proved the exception, gaining $1.70 to trade at $17.85/MWh. Notably, Mid-C daytime prices dipped to a low of -50 cents/MWh on Thursday.

Off-peak power finished at averages ranging from around -55 cents/MWh at Mid-C to $20.65/MWh at SP15 by Friday. Values at Northwest hubs eroded a couple of dollars on average since last week, save for COB, which gained about $1.50/MWh.

Bonneville Power Administration spokesman Michael Hansen says the agency now has 4,711 MW of wind-generation capacity, up from 4,421 MW in March. BPA has had to curtail wind production this spring but has not done so since May 2.

Working gas in storage reached 2,744 Bcf as of Friday, May 18, according to EIA estimates, a net increase of 77 Bcf from the previous week. Storage levels are now 37.6 percent higher than a year ago and 37.8 percent above the five-year average.

Spot natural gas prices closed relatively unchanged May 25 compared with the previous Friday, with Henry Hub flat at $2.56/MMBtu. In the West, the average spot price for Southern California Border gas lost 8 cents over the trading period, trading Friday at $2.45/MMBtu, while PG&E CityGate lost 2 cents to $2.86/MMBtu.

Summer cooling demand typically boosts natural gas prices, but market conditions are a muddle. "More demand because of warmer temperatures, coupled with a lack of additional production cuts to reduce supply, has sent traders conflicting signals lately," a May 25 Enerfax report stated.

What's ahead: California and Arizona expect warmer weather through Thursday, May 31, with Los Angeles reaching the 70s by Thursday and Phoenix forecast to reach 105 °F that day. A slim chance of rain remains in the Pacific Northwest forecast into Thursday [Linda Dailey Paulson].

Western Electricity Prices
Week's End: May 21 - 25, 2012
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 8.97-27.36 7.01-20.74
Mid-Columbia (-)0.50-18 (-)6-2
COB 11.50-19 1.50-8.25
NP 15* 23.10-27.50 16.75-20.25
SP 15* 28-34.50 17.25-23
Palo Verde 22.50-30 16.25-20.50

* 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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