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Western Price Survey

June 3, 2005
Off-Peak Prices Spike, Peak Power Deflates and ISO Warns of Storm

Mild weather and moderate system loads kept power prices mostly calm until Friday, when prices for off-peak power spiked as peak power bottomed out.

Because of the holiday, both Monday and Tuesday deliveries were traded the previous Friday. South of Path 15, peak power started the week at around 48 mills/KWh and breezed down to 41.50 mills and back to 47.75 mills/KWh in Wednesday trading. It finished at a Friday low of 40 mills/KWh. Off-peak power traded slightly above 20 mills/KWh most of the week, before spiking to about 31.50 mills/KWh in Friday trading.

The Arizona-California border, which has experienced peak-price volatility as to temperatures have climbed past 100 degrees, found relief this week. Peak power at Palo Verde started the week at between 43 mills and 50 mills/KWh. The spread tightened midweek to around 48 mills/KWh and dropped to a low of 42.50 mills/KWh for Monday deliveries. Nighttime power traded at around 20 mills/KWh for most of the week before rocketing to around 30 mills/KWh Friday.

Prices for North of Path 15 peak power dropped like a slowly deflating balloon. It traded between 45 mills and 49 mills/KWh through midweek, lost a few mills in Thursday trading, and finished the week between 40 mills and 46 mills/KWh. Off-peak power traded at around 20 mills/KWh through midweek before reaching a spread of 21 mills to 33 mills/KWh on Friday.

California-Oregon border peak power followed a a bell-curve pattern this week. It started the week at around 39 mills/KWh, climbed to 44 mills in Tuesday trading, and finished the week between 36 mills and 42 mills/KWh. Off-peak power traded at around 12 mills/KWh for Monday deliveries, 20 mills at midweek, and 30 mills/KWh Friday.

Mid-Columbia daytime power began the week at between 30 mills and 35 mills/KWh and reached 41 mills/KWh in Tuesday trading before shaving a few mills on Friday. Low-demand power gathered steam after trading for bargain prices the past few weeks. The price was set at a low of 10 mills/KWh at the start of the week, around 20 mills on Wednesday, and between 23 mills and 27.25 mills/KWh for weekend deliveries.

Jim Detmers, vice president of grid operations for the California Independent System Operator, recently warned that aging power plants in Southern California could break down this summer and cause blackouts in the area. During the Silicon Valley Leadership Group's annual energy summit on May 20, he said Cal-ISO would not be pulling people off the grid, but Northern California should conserve so energy could be sent south [Chris Raphael].

Natural Gas Prices Rise, Then Drop

How traders are setting the price of natural gas these days is anybody's guess.

Many energy analysts have been pegging the price of natural gas to that of crude oil, which ran past $55 a barrel Friday. Natural gas prices initially mimicked the week's rise, climbing in Thursday trading. But then they fell sharply on Friday.

Prices are also dependent on supply and demand of the commodity itself, and on Thursday the U.S. Department of Energy had good news to report: last week an additional 86 Bcf of natural gas moved into storage in the lower 48 states from the previous week, bringing total supplies to 1,778 Bcf--20.6 percent above the five-year average.

On Friday, natural gas prices took notice and dropped from price spikes set Thursday. Permian Basin natural gas started the week at a low of $5.35/MMBtu and climbed to $5.94 in Thursday trading before settling to between $5.45 and $5.82/MMBtu in Friday trading.

San Juan Basin gas started at a low of $5.07/MMBtu, rose to a high of $5.50 in Thursday trading, and subsided to $5.16 to $5.28/MMBtu in Friday trading. Southern California border gas started at a low of $5.41/MMBtu Monday and hit a high of $5.79/MMBtu for Friday deliveries, before ending the week slightly above where it started.

Considering sound inventories, some energy observers blamed the cost spikes on trader interference. New legislation introduced in the US House of Representatives last week would limit daily trading prices of natural gas to an 8 percent increase or decrease. The legislation, sponsored by U.S. Congressmen Sam Graces (R-Mo.) and John Barrow (D-Ga.) would also require the US Commodity and Futures Trading Commission to review future natural gas contracts for approval.

"Hedge funds and other paper traders on the NYMEX continue to enrich themselves while US gas consumers are forced to endure the world's highest and most volatile natural gas prices," Peter Huntsman, president and CEO of Huntsman Corp., said in a press release on Thursday. (Huntsman Corp. worked closely with Graves on the bill.) "In the last two trading sessions the price of gas on NYMEX shot up more than 65 cents and closed up 44 cents," Huntsman said. "On an annualized basis that costs the US economy between $10 billion and $15 billion" [C. R.].

Western Electricity Prices
May 30 - June 3, 2005
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 10.04-234.57 9.42-61.83
Mid-Columbia 30-41 10-27.25
COB 36-44 11.50-30
NP 15 40-49 14-33
SP 15 40-50 14.50-33
Palo Verde 42.50-49.25 11.50-32

Archives of the Western Price Survey for the past year are also available online.


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