Western Price Survey / Archives
June 9, 2000
Electric power prices broke through the 100 mills/KWh mark in Northern California and the Pacific Northwest this week, but then retreated to more familiar territory as clouds and showers cooled loads and expectations.
The spot power market is still showing signs of nervous disorder based on fears of possible disruptions. Symptoms included a run-up of prices at Mid-Columbia to 108 mills midweek after the California Power Exchange's hour-ahead market zoomed to 132 mills/KWh for a single hour on Tuesday. CalPX was responding to unit outages at Colstrip in Montana and Navajo station in Arizona rather than any proximate threat but the events still had an impact. "Nobody wants to be caught short," one trader observed. As a precaution, the capacity short Northwest has moved the Columbia Generating Station into full-throttle rather than the 60 percent load-following schedule it had been expected to follow between now and July 1.
The signs of stability in the market this week came from the CalPX day-ahead prices, which were relatively steady at 60 mills to 65 mills/KWh before slipping to 55 mills/KWh on lower loads for Friday deliveries. Off-peak hung in the 41 mills to 43 mills/KWh range, likely the incremental price of natural gas which has been setting the market.
Traders are still feeling their way through uncertain territory at these price levels. Just a year ago, for instance, the CalPX clearing prices were in the 14 mills to 25 mills/KWh range for peak power and off-peak was down in the single-digits.
Although Southwestern prices were still reflecting the long run of hot weather, they lagged behind the other bilateral hubs. Palo Verde moved up to about 82 mills midweek but softened to the 71 mills to 75 mills/KWh range for Friday/Saturday packages. Again, the high gas price made its showing in off-peak generation prices of about 42 mills/KWh at Palo Verde.
The big disparities between Power Exchange prices and those at regional trading hubs has a lot of traders scratching their heads, expecting either an exodus of energy sales out of California or some kind of convergence that never seems to occur.
Next week may not see the return to "normalcy" some are hoping for. Early indications from the broker market show Monday power transactions at up to 115 mills/KWh at Palo Verde.
Longer term projections are also reflecting price and supply concerns. After edging down a little, NYMEX futures prices for the California/Oregon Border July delivery contract jumped $16 to $104/MW and the August pact crossed to $101/MW. July Palo Verde contracts rose to $95.5/MW and may still be on the upswing. The PV August contract had been easing but reversed course Thursday to hit $110/MW.
And it's not even summer yet [Arthur O'Donnell].
Gas Traders Find No Safe Ground
Natural gas prices soared and dove like stunt planes this week, leaving traders with a severe case of vertigo. Prices across the nation had been escalating until Wednesday, when the American Gas Association's weekly storage report was interpreted as "bearish" because-well, no one was quite certain, given the fact that the numbers for injection are well below last year's levels.
In any event, prices crashed by as much as $0.050/MMBtu between Tuesday and Thursday, then they switched gears and began climbing again. The market showed an extremely wide range for the week and almost no predictability. "Whatever you use conspires against you," said one trader. "What looks like a good deal one minute turns out to stink the next."
The Southern California Border price moved up to $4.67/MMBtu, then collapsed to $4.37/MMBtu. Permian Basin ended out at $3.82 Thursday and San Juan followed to $3.72/MMBtu. Both basins had been about $0.47/MMBtu higher at their peak on Tuesday.
Even the Alberta hub picked up on the trends, peaking to $5.36/Gigajoule, but dropping to $5.06 before ending out the week at $5.05/Gj.
No one is expecting things to improve anytime soon. "Next week is toasting time," a marketer said, referring to an anticipated expansion of heat into the Midwest and Texas. The high price of electric power is both being caused by fuel price hikes and being used as an excuse to drive the gas prices higher. "Everyone is bullish," a buyer noted.
And everyone is watching the Gulf Coast for hurricanes [A. O'D.].
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