Western Price Survey / Archives
June 30, 2000
Like a highly sensitized person repeatedly exposed to poison oak or some other allergen, Western power markets broke out in a severe reaction to the recurring system alerts issued by California transmission operators. Extremely high prices swelled rapidly through the California Power Exchange and at bilateral hubs during the first part of the week. Although the rash of record-breaking prices appeared to cool in advance of the weekend, traders were still scratching and itching over the incident.
Shortly after traders completed their bids into the CalPX day-ahead market on Monday morning, word spread through the lines that the 1,100 MW Columbia Generating Station in Washington state had tripped. This had the effect of cutting any Northwest energy surplus headed into California and forced Bonneville Power Administration into buyer mode. Prices on real-time markets immediately jumped and continued climbing with the announcement that the California Independent System Operator was declaring a Stage One Alert, swiftly followed by a Stage Two requiring customer curtailments in Southern California.
Those system emergencies continued through Thursday. By Wednesday it was clear that the entire Western grid was experiencing a week to remember or to forget, depending on whether one was a seller or purchaser of power.
The CalPX hit another all-time high daily index price of 391 mills/KWh for deliveries on June 29 with an associated peak period index record of 522.5 mills/KWh. The off-peak price was 75.6 mills/KWh, but that did not match a prior record of 86.4 mills/KWh set earlier in the month.
Individual hours on the day-ahead market bumped up against the perceived 750 mills/KWh wall, mimicking the formal $750/MW limit on Cal-ISO imbalance energy markets, but the zonal prices and hour-ahead markets blasted through that mostly psychological barrier. The zonal congestion price for Northern California pathways reached 1099.9 mills/KWh and the day-of/hour-ahead market frequently saw prices above 1,000 mills/KWh on Tuesday and Wednesday. The new record high price for an unconstrained CalPX trading period appears to be 1,092 mills/KWh set during the 4 pm hour June 28 for 1,223 MW of supplemental load.
Bilateral hub prices were every bit as wild. At their peak, prices at Mid-Columbia hit 800 mills; COB prices topped at 700 mills and Palo Verde power demanded 600 mills/KWh or more.
Even though another Stage Two Alert was still to come, prices began to moderate on Wednesday. Trading patterns were altered to accommodate the end of the month and the upcoming July 4th holiday schedules. On Thursday, the few recorded transactions for Saturday/Sunday deliveries showed much lower prices: 90 mills to 105 mills/KWh at Mid-C; 135 mills to 175 mills/KWh at COB; and 130 mills to 175 mills/KWh at Palo Verde.
Besides the Columbia nuclear plant outage, which continued into Friday, there were other notable resource problems. The 670 MW Centralia Unit No. 2 was out at the beginning of the week. On Monday at about the same time as the nuclear trip, the intertie between British Columbia and Alberta, Canada, tripped, causing loss of 300 MW of generation at Cloverbar and forcing the Alberta Pool to implement emergency load-shedding actions. Prices spiked to 725 mills/KWh. But that was not the high for the Alberta Pool, which hit 745 mills on Thursday as loads crossed 7000 MW.
Nevada Power worried about resources because of outages at the Harry Allen, Clark and Reid Gardner stations, but they were reported mostly back in service by the end of the week.
Overall, loads throughout the region diminished on Friday and Cal-ISO said it was unlikely another alert would be issued [Arthur O'Donnell].
Volatility in Natural Gas Markets Continues
Natural gas prices ebbed and flowed in unnatural ways this week, responding to various stimuli such as the overheated electricity markets, bearish storage reports and continued tropical storm watches at the Gulf Coast. The up-down-up pattern of recent weeks appeared to get stuck in down mode late in the week, largely because of the upcoming holiday. Some market watchers, however, warned that the real 4th of July fireworks will occur in gas markets after traders return from their midweek hiatus.
For Western traders, this week was one to marvel over power markets and to notice emerging price trends, such as the lock-step motion at Southern California Border and PG&E CityGate prices. An iteration of that, however, was that SoCal Border indexes at SoCal Gas Company's Topock point were more expensive than PG&E's Topock price-with the difference largely the cost of moving gas into Northern California.
That made the spreads between CityGate and Malin quite large-as much as $0.60/MMBtu. That suggested holders of capacity on the PG&E line could do better than those facing double tariffs coming in from the south and that anyone with firm capacity from Canada was probably making money over those without [A. O'D.].
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