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Western Price Survey / Archives

June 1, 2001
California Averts Stage Three Outages, but Price Mitigation Plan Triggered

Cool ocean breezes carried California back from the brink of declaring rotating outages on Thursday afternoon. The California Independent System Operator came within minutes of declaring a Stage Three Emergency that would require up to 500 MW of block outages, but the winds of fortune blew in Cal-ISO's favor. "Mother Nature is helping us big time right now," Cal-ISO operation director Jim McIntosh told reporters during a 3 pm teleconference. "This is an example of why we're hesitant to make declarations [of blackouts] too far in advance."

Under executive orders from the Governor, Cal-ISO is now supposed to provide at least one hour's warning of rotating outages and 48-hour advanced notice of lesser emergencies.

The system was on edge for most of the day, as average temperatures in Northern California reached 99 degrees F, and air conditioning loads pushed the system peak to 37,758 MW-the highest peak figure yet in 2001. With all available generation on line (and only 8,000 MW reported unavailable), California was completely dependent on power imports, McIntosh said, posing a dilemma as higher temperature cut the allowed transfer capacity on the Pacific Intertie system by 500 MW in the middle of scheduled deliveries.

Making up for the loss was about 800 MW of voluntary curtailments by utility customers beginning with a Stage Two Alert at 11:30 am, then the change in winds that helped quell loads throughout the state.

Wednesday also featured Stage One and Two Emergency calls on record- breaking temperatures in Northern California. Even though the grid did not come as close to forced outages, the implementation of emergencies triggered the new market price mitigation plan ordered by the Federal Energy Regulatory Commission in April.

Whether the benchmark price caps featured under the plan had any real affect on prices is uncertain, as Cal-ISO had not revealed any data. Market sources indicated the first benchmark price that came out on Wednesday was 108 mills/KWh, compared to bilateral market prices of over 200 mills/KWh.

Overall, prices were hard to predict this week as the extended Memorial Day holiday led into a new month of contracts. The weekend had seen extremely low non-firm prices as Northwest hydroelectric producers found themselves with excess capacity and no need for the power.

Even when normal trading and operations resumed, the disparities in the market and uncertain prospects were apparent as key hubs moved in opposite directions. Low prices for the week were set on Tuesday for Wednesday deliveries with most locations falling to the 100 mills to 115 mills/KWh range. But the next day, prices shot up nearly double in the Southwest and Northwest at 200 to 225 mills/KWh before falling back to 140 mills, while Northern California went only half as far to 165 mills/KWh.

Then on Thursday, California/Oregon Border prices dropped to 140 mills to 160 mills/KWh while Palo Verde and SP15 climbed to 185 mills/KWh for the Friday/Saturday packages.

Off-peak prices were all over the map, with Palo Verde at the low end, reporting 22 mils to 50 mills, while other hubs moved in the 40 mills to 100 mills/KWh range.

Many generation units returned to service this week, in time to help avert the outages, among them Moss Landing No. 7, Ormand Beach Nos. 1 &2 and South Bay No. 4. But the biggest adds are still to come. Diablo Canyon No. 2 was at 92 percent Friday morning following its month long refueling outage and San Onofre No. 3 began restart testing this week after repairing serious damage to its turbines.

According to Southern California Edison, the unit was at 18 percent of power Friday but had not yet connected to the grid. Operators will conduct spin tests to check for turbine vibrations and then perform an over-speed test to make sure the unit automatically shuts off when operating beyond specs. If all goes well, Edison said SONGS may return to service be fore its mid-June target date [Arthur O'Donnell].

Gas Heads into June Uncertainty

Natural gas traders had little to say about pricing trends this week, except "up and down." Most hubs stayed in a fairly tight range, except for the Southern California Border, which dropped below $10/MMBtu and in Alberta, where prices fell to $(C)4.65/Gigajoule from the nearly $5/Gj level earlier.

Basin prices hit low points Wednesday, with San Juan falling to $2.82/MMBtu before picking up to $3.05/MMBtu. Permian was in a tight range of $3.60 to $3.65/MMBtu.

As in electricity markets, prices drifted toward the upcoming June contract terms, at least until the system emergencies put more pressure on gas-fired generation to perform on Thursday. Still, Pacific Gas & Electric's pipelines were stuffed and schedulers expected another zero-tolerance OFO over the weekend [A. O'D.].

Western Electricity Prices
Week of May 28-June 1, 2001
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 50-96.5 26-45
Mid-Columbia 103-205 40-100
COB 140-200 50-100
NP 15 129-200 50-100
SP 15 123-210 36-75
Palo Verde 115-225 22-40

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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