Western Price Survey / Archives
July 21, 2000
The best place to be this week, from a power market perspective, may have been on the edges of the Western grid in New Mexico or British Columbia. While Arizona utilities were beset with meeting record loads and California utilities faced back-to-back emergencies and congestion-induced high-prices, New Mexico was nestled in a relatively secure niche between high pressure fronts and right on the money as far as loads were concerned. "We're just watching those California dollars flow into Albuquerque," crowed one lucky seller this week.
Meanwhile, BC traders took time out from counting their sales proceeds to catch up on the Northwest water situation, which bodes well for Canadian suppliers if not so well for their cross-border neighbors.
Though the spikes were not as high as recently experienced, due largely to the new price caps imposed by the California Independent System Operator, energy prices remained at very high levels as a reflection of heat-induced demand.
The California Power Exchange logged two consecutive days of peak period prices above 256 mills/KWh after starting out at 94 mills/KWh and briefly dropping to 81.8 mills/KWh for Tuesday deliveries. Off- peak power moved between 52 mills and 62.4 mills/KWh with the up tick coming during Thursday's bidding.
The daily average index price jumped from 75 mills to 205 mills/KWh as prescheduled loads climbed to 641 GWh for Friday-the highest amount so far this year.
Day-of volumes were also high, hitting a new apparent record of 4,137 MW (combined supply and load-shedding bids) on Thursday afternoon at 4 pm. Add that to the 30,296 MW load prescheduled for that time period and it helps explain why the price pinned at the 499.99 proxy ceiling.
Prices throughout the region mirrored the California levels.
Palo Verde prices climbed well above 200 mills/KWh with the heat; there were reports of PV transactions at 230 mills to 260 mills/KWh, the buyers reported them as a pass-though deals, in which the energy was immediately turned around for re-sale into California at a premium price.
Although there were few physical limitations on transmission reported this week, the rush sell power into California made for some very high congestion pricing along SP15 and Path 26, leading to widely disparate zonal pricing as NP15 prices depressed and SP15 inflated.
Traders in Northern California and the Pacific Northwest were bystanders, unless they had excess power to sell to the south. Prices rose to 170 mills at Mid-Columbia, the California/Oregon Border and other bilateral hubs.
Sporadic generation outages briefly put some holes in traders' portfolios.
Four Corners No. 5 dropped offline Tuesday morning, but its 770 MW of capacity was returned to service Thursday.
The Columbia Generating Station fell to 75 percent of capacity Tuesday evening on a faulty control rod diode. The unit was quickly repaired and back to 100 percent Wednesday [Arthur O'Donnell].
Gas Plummets After Storage Report but This Time Does Not Rebound
Once again, natural gas price benchmarks dove by about $0.25/MMBtu following the American Gas Association's weekly storage report on Wednesday. Unlike last week, though, the prices just seemed to sit in a trough rather than rebounding. One reason, according to traders, is that hot weather appears slackening rather than looming.
Still, some pointed to certain market indicators that would argue for increasing prices, such as continued demand from electric generation that caused a low-inventory OFO on the PG&E pipeline midweek. The pipe was as much as 500 MMcfd below capacity and shippers were told to get their withdrawals within 1 percent of balance or face penalties. The action seemed to work and by Thursday, capacity was not only near full but perhaps a little too full. "They might be overcorrecting," a trader noted.
The NYMEX screen dynamic set the pace for border and basin prices. SoCal Border prices dropped from $4.75 to about $4.63/MMBtu, San Juan Basin tracked about $1 lower and Permian Basin stood at $3.88/MMBtu after starting the week at a strong $4.17/MMBtu.
Malin moved in the $3.88 to $4.03 range, centering at about $4.01 on Thursday. PG&E CityGate prices came in at $4.47 to $4.50, which was either cheap or expensive depending on whether one was a seller or buyer.
The Alberta index price collapsed from $(C)4.40/Gigajoule to $4.24/Gj [A. O'D.].
California System Emergencies Triggered by Southwest Heat
An extended heat wave over the Southwest not only pushed three major Arizona utilities to new peak load records this week, it also forced the California Independent System Operator to declare consecutive days of system emergencies.
The interplay of utility load growth, hot weather and high power prices led to a big disparity between forecast loads and available resources for the fourth time.
The first wave of market impacts was felt in Arizona on Monday when Salt River Project and Arizona Public Service reported new demand records, as consumers turned to air-conditioning relief from sustained temperatures over 110 degrees F. Those new peaks were surpassed repeatedly, and Tucson Electric Power joined the circle on Wednesday and Thursday.
As of Thursday afternoon, the new demand records for the utilities (preliminary figures) stood at:
The prior load milestones for these utilities were set in 1998 and each cited tremendous load growth as the major reason for record demand.
The draw on power from the desert communities did not prevent a rush to sell power into Southern California, as utilities and the Cal-ISO appeared to underestimate demand to a fairly significant degree and prices zoomed.
The California Power Exchange's day-ahead market saw hourly prescheduled peak period loads top 31,000 MW routinely this week, but that was not enough to meet demand in Southern California. The CalPX hour-ahead ahead market cleared more than 2,499 MW in a single peak hour on Wednesday; 1999 MW was incremental supply and 500 MW of decremental demand at 499.99 mills/KWh.
The hour-ahead market accelerated even more on Wednesday with 3,629 MW of added supply and 507.6 MW of load reduction bids clearing at the same 499.99 mills/KWh price. These figures appear to establish a new record for volume scheduled on this particular market.
Day-ahead loads and prices did not approach previous records, largely because the imposition of lower caps on the Cal-ISO serve as a proxy ceiling on CalPX prices. Still, the daytime averages on the Power Exchange reached a sustained 256 mills/KWh level Thursday and Friday, signaling a premium price situation.
After warning market participants of an impending situation via a "no touch day" notification, Cal-ISO jumped directly into a Stage Two Alert Wednesday afternoon, citing especially high loads in Southern California. The second-level emergency triggered customer curtailments of approximately 920 MW of load-880 MW in Southern California Edison territory and 40 MW from San Diego Gas & Electric customers who are under interruptible contracts. Cal-ISO loads reached 41,680 MW Wednesday afternoon.
The situation extended into Thursday and the system operator declared a Stage One Alert beginning at 11 am, although it did not proceed into the next level. Load peaked at 41,781 MW on Thursday, according to the Cal-ISO [A. O'D.].
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