Western Price Survey / Archives
July 2, 1999
The Western power market barely survived its own version of a " triple witching" this week as the end of the month coincided with advanced trading for a three-day July 4th holiday weekend and the first real heat wave of Summer 1999. A trading frenzy was exacerbated June 29 when the California Independent System Operator declared a Stage One Alert, triggered by heavy loads and loss of nearly 2,000 MW of generation capacity. Though the emergency lasted only a few hours, it was accompanied by a run up of prices on the California Power Exchange's supplemental energy market to a peak of 250 mills/KWh late on Tuesday afternoon.
The next morning saw even more market confusion when the PX declared an "anomalous bidding" situation that caused it to rerun the daily auction and briefly withhold release of market clearing prices for Thursday deliveries. Although the delay lasted less than half-an- hour, uncertainty reigned at bilateral trading hubs and power prices zoomed to nearly 100 mills/KWh in the Southwest and 70 mills/KWh at the California/Oregon Border.
Although things calmed down a bit when the PX peak period clearing price was revealed to be shy of 50 mills/KWh (far lower than the 67 mills/KWh mark reached the prior day), market pressures continued because of hot weather. Temperatures well above 100 degrees stretched across California and the Desert Southwest, pushing at least one utility, Nevada Power, to a new peak demand record on June 30-reaching 3933 MW. Nevada Power attributed the new record to its steep and continuing load growth. Other utilities watched their resources closely on both Wednesday and Thursday afternoons.
However, because of advanced trading that bundled light-load weekend days during Thursday's trading sessions, prices fell steeply. The overall result was a wild market ride with a wide range of prices within particular regions and big differentials among regions.
The Power Exchange clearing price ranged between 35.7 mills and 67.2 mills/KWh for daytime deliveries, but some individual peak hours ran all the way up to 131 mills/KWh. Off-peak prices were more contained between 14.6 mills and 17.6 mills/KWh.
Southwestern transactions showed peaks prices of 95 mills/KWh on prescheduled trades and 150 mills/KWh for some real-time hours on Wednesday. The California/Oregon Border price was not nearly so excitable-hitting 60 mills/KWh midweek.
In stark contrast was the Pacific Northwest, where cloud cover and rainfall capped temperatures and added to river flows. At most, Mid- Columbia prices reached 40 mills/KWh, but they did not remain there for long. Bonneville Power had between 100 MW and 200 MW per hour of surplus firm energy available all week, with prices tied to the California Power Exchange. Some traders suggested that the public postings understated how much BPA was really willing to sell at the market premium.
Thursday's trading marked both the start of a new month and a very different market profile-except in Arizona where triple-digit temperatures still ruled and Palo Verde power was still trading in the 40 mills/KWh vicinity for both prescheduled and real-time transactions. Mid-C dropped as low as 20 mills/KWh and COB fell to 27.5 mills/KWh as temperatures slipped into a more comfortable zone.
Looking ahead to next week, several traders pointed to forecasts of above-average temperatures once again for California and the Southwest, meaning that this week might have been merely a dry-run for what is still to come [Arthur O'Donnell].
Gas Peaks With Power Demand, Then Moderates on NYMEX Screen Action
Western natural gas prices rose and fell with the tides of power generation demand this week, but were not nearly as volatile as electric markets. The greatest action occurred in Southwestern hubs: Southern California Border prices climbed from $2.35/MMBtu to as much as $2.53/ MMBtu before slipping back to around $2.42/MMBtu.
Permian Basin prices peaked at about $2.27/MMBtu in response to the strong Western market demand midweek, then eased to $2.24/MMBtu. San Juan prices ran between $1.96 and $2.13/MMBtu before settling at $2.00/MMBtu.
Some traders pointed to late week trends on the NYMEX screen as the reason for moderating prices, while others said that pipes into Southern California were packed fuller than market demand required. A high-inventory situation in SoCal Gas territory capped prices, one trader said. Still, when wholesale prices translated into retail core procurement rates, SoCal's July prices jumped to 2.66/MMBtu-an increase of $0.46/MMBtu compared to the June price of $2.17/MMBtu.
In contrast, the Alberta gas price moved hardly at all. "It pops up a penny or two, but cannot hold there," observed one California gas buyer. Contributing to the weak market activity was celebration of Canada Day this week, which prompted sellers to wrap up business early. The Alberta index moved between $(C)2.70/Gigajoule and $2.75/Gj, but ended the week at $2.70/Gj once again.
Over the American holiday weekend, PGT Northwest is conducting inspections and cleaning of its main pipeline system. Total system capacity of 2.7 Bcf/day will be capped to about 1.9 Bcf/d during the operations [A. O'D.].
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