Western Price Survey / Archives
May 26, 2000
With the Memorial Day weekend holiday altering trading patterns to allow three-day advanced transactions, prices dropped precipitously from the record-high peaks reached early in the week.
By Thursday, traders were already looking into prospects for the coming month but appeared uncertain as to what the future will hold. Another round of summer-like weather was expected in the Southwest but concerns about resource availability that drove this past week's market were lessened by the return to service of a Palo Verde unit and expected restoration of Diablo Canyon generation.
Bilateral transaction prices were hard to pin down, as still-shocked traders looked to the California Power Exchange to make their pricing decisions for them. Generally, peak power in Northern California and the Pacific Northwest moved into the 50 mills to 55 mills bracket with off-peak about 35 mills/KWh, while Palo Verde transactions dropped to the 45 mills to 50 mills/KWh range for 24-hour blocks over the holiday weekend.
Several traders termed those price levels "pretty good" before realizing that just two weeks ago they would have been appalled at such high figures. This week's market experience seemed to have forever changed traders' perceptions of what to expect during a system emergency.
After establishing new all-time records for pricing in day-ahead and hour-ahead markets, the CalPX closed out the week at 53.25 mills for Friday's peak period and 35 mills/KWh for off-peak.
The bilateral markets had reached into the stratosphere on Tuesday-up to 220 mills/KWh at Palo Verde and 200 mills in California and the Pacific Northwest. Real-time markets were all over the place, appearing to top out at the Cal-ISO rate cap of 750 mills/KWh.
While the market sorely missed Diablo Canyon and Palo Verde nuclear capacity, the Columbia Generating Station benefited from the high market by raising output above 80 percent this week. The unit is in load-following mode with capacity limited by some scheduled equipment repairs, but operators cranked up output as much as possible to help fill in the market gap caused by low hydroelectric generation.
Diablo Canyon No. 1 was reported to be moving toward restart late this week, entering Mode 4 hot standby after last week's auxiliary turbine fire forced the unit into a cold shut-down. Pacific Gas & Electric expects the unit to reach full output by May 31.
Futures prices also seemed to be reeling from the strange market, with mixed reactions at major hubs although trading activity was negligible.
The NYMEX Palo Verde contract for July drifted a little to $85.70 but August pacts rose above $108.70/MW this week. At COB the July and August prices fell fairly hard to $75 and 86/MW respectively.
The June contracting period will expire this week, by Thursday, the settlement prices were $54/MW for COB and $66/MW at Palo Verde.
On the CalPX block forward markets, there was reported high activity for Northern California contracts on May 25 in advance of the June contract trading expiration on Friday. Late prices showed NP15 prices rising almost $5/MW to $60.10 for June contracts and $83.80/MW for third-quarter (Q3) pacts. SP15 saw no change: June ended at $47.70, July was $78.55 and August $88.20/MW. Q3 prices at SP15 were $79.35/MW [Arthur O'Donnell].
High Gas Prices Scare Supplies Out of Storage
The upward trajectory of natural gas prices got a second boost late in the week, as national NYMEX benchmarks popped just before Thursday's cvlose of trading, taking regional hub prices along for the ride.
Up to that point, it seemed that the market was slowing down as shippers and end-users pulled supplies out of storage to mitigate expenses. The lessening of California's electric system emergency quelled demand, but evidently concerns about another heat wave next week contributed to late action.
SoCal Border prices had nearly reached $5.00/MMBtu on Monday during the electric emergency but came down fast midweek to $4.15 before climbing again to $4.31/MMBtu.
Permian Basin supplies were around $4.00/MMBtu and San Juan Basin gas slipped to the $3.85 to $3.89/MMBtu range. At peak, both basins had been as much as $1 higher.
After a slow start due to the Victoria Day state holiday in Canada, Alberta market prices zoomed to near $5.08/Gigajoule, on concerns about future supplies and current deliverability problems.
Overall, natural gas prices are at their highest levels since 1997, and at unexpectedly expensive plateaus for the late-spring period. That situation leads traders to believe prices will remain strong overall, although the driving force of electric demand may not been so robust next week [A. O'D.].
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