Western Price Survey / Archives
June 8, 2001
Western power prices fell to their lowest levels in over a year this week, as a confluence of positive factors helped stabilize the marketplace. Mild weather, moderate loads, a steep drop in natural gas prices, the return to service of numerous power plants and-at least temporarily-improved river flows in the Pacific Northwest, all joined together to create an unusual sense of market calm throughout the region.
"We're back to fundamentals," said one scheduler. And while aware that a return of hot weather could change the picture overnight, he said that weather projections seem to put that possibility off for at least another week. "There's nothing on the horizon that's going to change the situation."
Given that Monday's market began in a range of 150 mills to 185 mills/KWh, the resulting spread of pricing was quite wide.
Daytime spot power prices fell to as low as 37.5 mills/KWh in Northern California, and state officials crowed about "turning a corner" on the power crisis-as if the most recent state of emergency was months ago, not just last week. The Department of Water Resources even speculated about dropping some pending contracts for summer power, or attempting to win pricing concessions from generators based on the low market levels.
Veteran traders, however, warned, "what goes down might well go back up," and noted the slight rebound in prices Thursday meant the market had found its bottom and was now searching for equilibrium.
Some utilities said they were mainly in the market to test whether prices were low enough to displace their own generation resources. After a few days of market stability, they felt comfortable enough to back down some gas-fired units and replace the power with market bargains. Though Mid-Columbia, NP15 and California/Oregon Border prices dropped to the 30s, it picked up again to the 50 mills/KWh level heading into the weekend.
Palo Verde was seen in a range from 48 mills to 70 mills/KWh for the two-day packages, but most trades centered in the low 50's, schedulers said. Four Corners ranged between 45 mills and 58 mills/KWh.
Off-peak power was at remarkably low levels as well. With a surplus of generation still running at night, Southwestern prices dropped to 10 mills to 15 mills midweek. California and Northwest points reported prices down into the low 20s for a while, but picking up to around 33 mills/KWh at NP15 and 27 mills/KWh at COB.
The California Independent System Operator reported that its list of unavailable units had shrunk to just 4,803 MW on Thursday, the least amount of outages in recent memory. Cal-ISO loads gradually picked up as the week progressed but were still in the comfortable zone. Thursday's peak of just over 35,000 MW was more than 2,500 MW greater than grid operators had initially forecast, but the improved availability of supply meant Cal-ISO did not break a sweat meeting demand [Arthur O'Donnell].
Momentum Shifts in Gas Markets
The collapse in electricity prices was mirrored in natural gas markets this week, as both border and basin prices dropped to levels unseen in months. Even the Southern California Border price plummeted on reduced demand, falling to $5.85/MMBtu Thursday.
The nearby PG&E/Topock hub was down to $3/MMBtu, and traders said it was not economical to even try transporting supplies up the line, given that pipelines from Canada were stuffed with gas that no one had a home for. PG&E declared a tight operational flow order with severe penalties of $25/decatherm for imbalances.
Malin was thinly traded at a midweek index point of $3.27/MMBtu but the SF CityGate slid to $3.05 on the bid side Thursday.
San Juan Basin supplies fell to $2.58/MMBtu and the Permian Basin dropped to $3.48/MMBtu.
The Alberta price eroded from a high of $(C)4.90/Gigajoule to $4.37/Gj late in the week [A. O'D.].
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