Western Price Survey / Archives
July 16, 2004
Last week it was fire, this week it was rain. The elements seem to be conspiring to prevent Arizona's major utilities from having anything resembling a quiet week. As the monsoon season rolled into the state early this week, a major storm shut down a unit at the Palo Verde Nuclear Generating Station and caused temporary outages for customers of both Arizona Public Service and Salt River Project.
Coming on the heels of the conflagration at the Westwing Substation near Phoenix that destroyed a handful of transformers at the site, the storm hit the region very early Wednesday morning. Numerous lightning strikes to a nearby switchyard forced the 1,352 MW Palo Verde Unit No. 2 off line, and the facility was not expected to be back in service before the coming weekend.
The fire at Westwing continues to take its own toll on electricity consumers and wholesale purchasers alike. The damage to five transformers at the station will make transfer of power throughout APS' territory, particularly the metropolitan Phoenix area, difficult for a number of months. APS and SRP have stepped up their consumer awareness campaigns for conservation and have been monitoring demand assiduously over the past week.
One bit of good news did surface this week for the beleaguered Arizona utilities when a new transformer was located in Washington to replace one of the burned transformers at Westwing. The unit is being barged south for delivery to APS and should be in service later this summer, enabling the utility to restore Westwing to about 65 percent of its transfer capacity. The substation will not be fully operational until next summer, when the rest of the damaged transformer units will be replaced, said APS spokesperson Sheri Foote.
Foote noted that the utility has hired a third-party consultant to investigate the cause of the fire.
Adding stress to a strained grid, the week opened with high demand and heavy loads in the Southwest due to rising temperatures. Price followed load, and the cost for power at the Palo Verde hub rose steadily during the week. By Wednesday, it had soared up to 82 mills/KWh. Cooler temperatures prevailed in the second half of the week and prices dipped. Peak-time power at Palo Verde shed about 10 mills in Thursday trading. Low-demand power drew between 36.75 mills and 44.25 mills/KWh this week.
South of Path 15, power costs also rose as the week wore on. By the middle of the week, high-demand power was trading for 81 mills/KWh, nearly 20 mills more than it had attracted at the beginning of the week. As in the Southwest, the SP15 price dropped by 10 mills in Thursday dealings. Off-peak power prices opened the week between 42.75 mills and 44 mills/KWh, and stuck to that range for much of the week before rising to a high of 52 mills/KWh for weekend load.
At NP15, peak-power prices ranged from a low of 59 mills/KWh on Tuesday to a high of 70 mills/KWh the following day. Nighttime power at the hub mirrored the cost of power at SP15, ranging from 41.75 mills to 46.50 mills/KWh much of this week before posting a gain of 5 mills in Friday trading.
As usual, the price of power at the Mid-Columbia hub attracted the lowest prices at Western hubs. Mid-C was the only location at which power was traded for less than 50 mills/KWh. On Monday, peak deliveries were trading for between 47 mills and 50 mills/KWh. The cost of power ratcheted up to a high of 58 mills/KWh by Wednesday, before shedding two to three mills in late-week exchanges. Low-demand power at Mid-C began the week in the range of 40 mills to 43 mills/KWh before swelling to a high of 49.25 mills/KWh for Thursday deliveries [Shauna O'Donnell].
Spot Gas Goes Nowhere
Though a warming trend in the weather is driving the need for natural gas for electricity generation, that demand is offset by the decline in use of gas for heating purposes. With demand in a steady state condition, day-ahead prices remained fairly static from last week's figures.
At the Malin hub, gas both opened and closed the week near the $5.40/MMBtu mark. PG&E CityGate gas barely budged, sticking to a range of $5.80 to $5.90/MMBtu all week.
The only real price movement was seen in the forward markets, where August gas took a hit on news of last week's injection of 108 Bcf into underground storage [S. O'D.].
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