News Services
CU/CEM Archives CU/CEM Archives:

Order now and save 50%!

CD-ROM archives of Clearing Up and California Energy Markets are available for purchase and delivery.

Western Price Survey / Archives

July 6, 2001
Holiday Breaks Market Momentum

With Independence Day splitting the market week in two, there was a discernable difference between halves. Monday and Tuesday were marked by system emergencies in California and record setting demand in the Southwest. Prices bumped up against the new federal price caps in most places and sometimes exceeded them at Palo Verde. Though temperatures remained well above 100 degrees in the desert region, Thursday and Friday's markets were far more subdued, and prices slipped below the benchmark price. "It's pretty quiet and loads are down," said one trader on Thursday. That assessment contrasted sharply with the pre-holiday reports of confusion over prices and available supplies that were rampant earlier in the week.

The change in pricing dynamics was fairly dramatic. California and the Northwest clung to the 92 mills/KWh cap benchmark during non-emergency hours, and Palo Verde transactions were reported as high as 135 mills/KWh during the critical periods.

While California was in its staged emergencies on Monday, the Cal-ISO proxy price dropped to 70.48 mills and picked up to 89 mills/KWh. The Tuesday emergency price was a more steady 86.68 mills/KWh.

When the dust settled, however, Cal-ISO reset the proxy at 91.87 mills/KWh-despite all the emergency episodes.

"There's a lot of confusion out there," reported schedulers during the worst of the crisis. Part of the confusion came from the delay in Cal-ISO reporting a proxy figure and part of the mess was because of the hourly fluctuations. Under the federal price formula, the heat rate of the last unit placed into service to meet California load each hour is supposed set the price throughout the West. The emergency prices were lower because the July gas index was less than $4/MMBtu, but the hourly variation came from a different unit being called into service with each higher-demand hour.

But the most confusion stemmed from last-minute power " redirection" as sellers took back promised deliveries throughout the region to meet local reliability needs-or because they could not even guess what the going price was supposed to be.

Heading into the weekend, things were a bit more predictable, and prices slipped everywhere-although the Southwest prices were still up at the proxy level. The going peak rate at California/Oregon Border and NP15 was 75 mills/KWh, but there was some bargain power available from a couple of brand new generating units at Stutter and Klamath Falls. Unit contingent energy at 50 mills to 57 mills/KWh was available for buyers willing to risk variations in output due to project testing. That was good for municipal utilities that could back down some gas-fired generation or hold back precious hydro production.

Off-peak prices fell into the low 40s throughout the region.

While the Southwest recuperated from critical unit outages at Mojave, Reid Gardner and Saguaro stations, the Columbia Generating Station in Washington was slowly creeping back from a nuclear refueling outage. On Friday morning it was at 86 percent and rising after a 45 day outage.

California's resource picture brightened with the new operations at Sutter and Sunrise, and the Cal-ISO outage figures for others fell below 3,000 MW.

Only 550 MW worth of units were reported in planned outage and 2,386 MW took unplanned leave on Thursday.

With Cal-ISO loads down to the 37,250 MW level, the grid operator reported a boost in exports to the Southwest but still plenty of cushion to meet domestic load [Arthur O'Donnell].

Gas Prices Offer Surprises

Perhaps it was an unexpected demand for natural gas as fuel for weekend barbecues, but prices in the West took an unanticipated turn upward late in the week after dropping before the Independence Day break. Generally, though, basin and border prices remained far lower than they were even a month ago, and even some pipeline repairs did not greatly disrupt supplies coming out of the Pacific Northwest.

At the bottom of the market was the San Juan Basin, where prices moved from a low of $2.20/MMBtu to $2.37/MMBtu. The Permian Basin climbed above the $3.10/MMBtu mark and the Southern California Border price popped from around $5.50 to $6.55/MMBtu late in the week..

At nearly $5/MMBtu, the San Francisco CityGate showed a $1 premium above PG&E Topock prices, but few could explain why as there seemed to be plenty of space available on the northbound pipeline. Malin hung out at $4.00 to $4.10/MMBtu.

The Alberta index had been as low as $(C)3.17/Gigajoule but climbed up to $3.32/Gj late on Thursday. Repair work at Stanfield would have cut supplies heading into California but for the midweek hiatus and traders said there was little disruption later in the week [A. O'D.].

California Averts Outages, but Las Vegas Loses Blackout Bet

With record-setting high temperatures spreading across California and the Desert Southwest, the electrical grid came dangerously close to a meltdown just before the July 4 holiday. The California Independent System Operator moved right up to the edge of declaring Stage Three rotating outages on Tuesday afternoon before reaching into its resource pockets for enough power to avert firm curtailments.

However, faced with record loads and loss of generation and promised energy supplies, Nevada Power was forced into cutting power to 10,000 customers for about 45 minutes on Monday afternoon, July 2. At the same time, Arizona Public Service Company and Salt River Project logged new peak demand records, but claimed they had no trouble meeting load despite some generation losses.

Complicating the tight supply situation across the West was the implementation of new federal price controls, which resulted in even lower prices during the system emergency than had been in effect during non-critical periods in California. There were, however, transactions recorded at Palo Verde that exceeded the regional price caps as buyers scurried to meet record demand.

The California Department of Water Resources alleged that out-of-state suppliers withdrew power from the market as a result of price uncertainty, but Cal-ISO could not verify the claim that between 600 MW and 1,500 MW disappeared when price caps kicked in. Nevada Power had a similar complaint that California sellers took back 315 MW of power that was scheduled for delivery.

Despite DWR's claims, Cal-ISO said it has "no evidence of withholding" on Monday or Tuesday, said spokesperson Gregg Fishman. "We're still looking at the data, but we don't see anything that points to withholding."

During the two successive days of emergencies, Cal-ISO posted new benchmark prices that ranged between $70.48/MWh and $90/MWh, but when the emergencies ended, it reverted to the $91.87/MWh proxy price previously established for non-emergency hours.

Because there was not a full hour of Stage One, "there was no opportunity to establish a new maximum [market clearing price] for real-time energy transactions," Cal-ISO told market participants.

Cal-ISO's director of client relations Byron Wertz admitted that this is an interpretation of Federal Energy Regulatory Commission price control order. "This is our interpretation. It does not state anywhere that you need a full hour [of Stage One] but it would be required by the way prices are set" on the Cal-ISO imbalance energy market.

Given the confusion in the market over setting the caps and the possible impacts of limits, it is expected that requests for clarification will soon be making their way to FERC's door.

The Cal-ISO peak crested at 40,065 MW in the 3 pm hour Tuesday, somewhat less than Monday's final figure was 40,241 MW.

The Southwestern situation came as a result of hot weather, unit outages and peak loads rising faster than anticipated. Unit outages at Mohave and Reid Gardner in Nevada had put Nevada Power on "yellow alert" since June 29. Despite voluntary load shedding by larger customers, Nevada Power had to cut about 10,000 residential customers for 45 minutes Monday afternoon in its first episode ever of firm load curtailments. Subsequently, another large residential area was without power for two hours, but the utility claimed it was scheduled maintenance at a substation.

Arizona was also resource shy by about 350 MW with unit outages at Saguaro and at other peakers. APS said it called on customers to voluntarily reduce consumption, but it did not provide a load figure. Temperatures were recorded above 115 degrees F across the Southwest, but dropped a couple of notches on Tuesday, helping to prevent a repeat performance.

Several utilities reported new peak records on July 2. Nevada Power hit 4,421 MW; its prior record was set August 1, 2000, at 4,325 MW. Salt River Project logged 5,163 MW on Monday, topping the 5,002 MW sequential peaks set on July 26-27, 2000. And Arizona Public Service reached 5,753 MW, compared to the 5,479 MW mark from July 18, 2000.

Things calmed down considerably midweek because of the national holiday, with loads throughout the region falling substantially [A. O'D.].

Western Electricity Prices
Week of July 2-6, 2001
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 33-125 10-32
Mid-Columbia 70-92 40-75
COB 50-92 50-80
NP 15 57-92 43-80
SP 15 75-92 42-84
Palo Verde 89-135 40-85

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

The Western Price Survey is excerpted from Energy NewsData's comprehensive regional news services. See for yourself how NewsData reporters put events in an accurate and meaningful context -- request a sample of either or both California Energy Markets and Clearing Up.

Please contact with questions or comments about this site.

Contact Shauna O'Donnell, editor with questions regarding Price Survey Content.

Energy Jobs Portal
Energy Jobs Portal
Check out the fastest growing database of energy jobs in the market today.
What's New

Substation Northwest Podcast, Episode 4
Taste editorial excellence.