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Western Price Survey

Week's End Edition
August 7, 2009
Off-Peak Power Rises Slightly, Yet Markets Remain Stable, Cheap

On a recent earnings call, analysts asked Sempra Energy about low margins on trades for electricity and natural gas.

Although last year at this time Sempra's trading subsidiary benefited from higher prices, right now "we have probably some of the lowest gas prices and lowest power prices across the country that we've had in a long time," Sempra Chief Financial Officer Mark Snell said. "And that's in sharp contrast to some of the highest prices we had a year ago, so that has taken the value of volatility really out of those markets."

Snell also mentioned that "differentials across the country are about as low as they've ever been." California natu-ral gas, which traditionally trades at a steep discount to Henry Hub, "is actually even with Henry or just a few cents above, so all of those kinds of factors have led to the power and gas business being a tough trading environment cur-rently."

Spot Western electricity and natural gas prices the past few months have been in line with Snell's analysis. Power has been cheap -- usually $30 to $40 for peak power -- with gas prices around $3/MMBtu. Volatility has likewise been tame.

This week was little different. Daytime power values spread little more than $7/MWh in either direction and gained, on average, about $2 in California hubs. Off-peak power did jump up a little more, but spreads were tight.

California prime trades, for instance, climbed about $1 to $2 at North of Path 15 and South of Path 15 to average around $40.26/MWh. Palo Verde peak prices were nearly static at an average of $38.53.

Nighttime trades did advance about $7 on average for the week at Palo Verde, NP15 and SP15 (see chart).

The slack economy continues to moderate power demand. In California, peak electricity use stayed below 40,000 MW this week and fell to 35,900 MW by Thursday, according to the California Independent System Operator.

The situation in the Northwest was a little different. The area has been recovering from a heat blast, and to add to the situation, the Columbia Generating Station in Washington was shut down Wednesday after an electrical fault sparked a fire in an overhead tray that contains electrical cables. The 1,150 MW plant will return to full operation when repairs and an investigation into the fire's cause are complete.

Peak California-Oregon border prices added nearly $4 to close at an average of $43.25/MWh. Off-peak values rose $5 to average $35.15.

Average Mid-Columbia prime trades settled out the week $3 higher at $39.62. Nighttime deliveries gained $5 to average $34.10/MWh.

Working natural gas in storage vaulted to an all-time high for the end of July, closing out the month up 66 Bcf at 3.089 Tcf, the U.S. Energy Information Administration reported. Inventories are at the highest point for this time of year since the department started tracking monthly levels in 1976. Storage is running 23.1 percent higher than a year ago, and 19.1 percent above the five-year average.

Hot weather out West kept storage increases limited to 1 Bcf last week, leaving supplies at 442 Bcf, or 25.2 per-cent over last year, and 21.4 percent higher than the five-year average.

Overall, energy drillers have been closing rigs since last September, when they peaked at 1,606 because of low prices. In the last few weeks, however, natural gas rigs in operation have multiplied as producers grow a tad more confident about an economic recovery and higher energy demand. Houston oilfield-services firm Baker Hughes re-ported that working natural gas rigs increased by four rigs this week to 681.

What's ahead: Temperatures are expected to creep up into the high 60s in San Francisco and the mid-80s in Los Angeles this weekend. Phoenix will bake in the low triple digits this weekend. It's back to cool temperatures and rain in the Northwest, with temperatures in the low 70s in Seattle and Portland through the weekend [Kristina Shevory and Chris Raphael].

Western Electricity Prices
Week's End: August 3 - 7, 2009
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 7.85-57.04 7.85-32.50
Mid-Columbia 34-42 28.25-36
COB 36.50-44 29-36.50
NP 15* 35.25-40.60 24.75-33
SP 15* 35.25-40.65 24-31
Palo Verde 35.25-40 21.25-30.50

* Prices represent both day-ahead locational marginal prices (financial swaps, or EZ Gen DA LMPs) and quasi-swap prices (EZ Gen) as reported by ICE.

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


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Contact Chris Raphael, editor with questions regarding Price Survey Content.

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