Western Price Survey
Week's End Edition
In the West this week, daytime electricity prices fell in unison until Friday, when trades climbed in the Northwest but dropped in California and the Southwest.
The Friday rise in Northwest prices may have to do with an approaching heat wave, as Seattle and Portland are expecting temperatures in the 90s and 80s next week. Also, the Columbia Generating Station is still off line after an electrical fault last week sparked a fire in an overhead tray that contains electrical cables. The 1,150 MW plant will return to full operation when repairs are completed.
Normally such events might provoke wild swings in peak prices, but the overall drop in energy demand and stable, depressed natural gas prices -- both remnants of a lingering recession -- likely kept a lid on price movements. Trades for peak electricity in Mid-Columbia, for instance, gained only $1.50 for the week to average $43.09/MWh, while nighttime deliveries increased over $2 to $34.07.
At the California-Oregon border, peak prices were even, settling at an average of $45.92/MWh on Friday. Average off-peak trades added more than $2 to $34.92.
In California, a fire broke out north of Santa Cruz on Wednesday night and quickly spread to 4,170 acres by Friday thanks to winds gusting up to 20 mph. More than 2,000 people have been evacuated from the area, and two outbuildings have been damaged. Only 5 percent of the fire has been contained, according to the California Department of Forestry and Fire Protection.
Electricity prices in the Golden State fell, however, as peak electricity use steadily dropped from 40,200 MW on Monday to 38,700 MW on Thursday, according to the California Independent System Operator. Daytime prices dropped more than $2 to average $40.24/MWh at North of Path 15, and nearly $4 at South of Path 15 to $38.77/MWh. Nighttime values climbed $4 to average $31.50 in the north and $29.59 in the south.
Average Palo Verde peak trades drooped $7 to $34.15/MWh, but nighttime prices climbed $2 to $25.62.
In terms of generation availability, it's been a hectic week at the Diablo Canyon nuclear plant near San Luis Obispo. Last Sunday, the facility's 1,138 MW first unit was ramped down for scheduled maintenance, but was back at full capacity on Thursday. However, on Thursday afternoon the 1,130 MW second unit was shut down to test one of the main components of its transformer system.
The U.S. Energy Information Administration, in its recent short-term energy outlook, gave an overview of conditions in the energy markets. During the first half of the year, there was 3.8 percent less natural gas used than in the same period last year. Coal and natural gas prices are now about even, prompting many utilities to switch over to natural gas. This year, among industrial users, natural gas usage is likely to rise 2 percent.
However, as the economy continues to skid with the brakes on energy demand and new drilling, natural gas storage is expected to hit 3.8 Tcf at the end of October, besting the previous record of 3.565 Tcf set two years ago. Last week storage reached 3.152 Tcf, up 63 Bcf, and now exceeds last year's level by 23.1 percent and the five-year average by 19.6 percent.
Henry Hub spot prices are expected to remain below $4/Mcf at an average of $3.92/Mcf this year, according to the EIA. However, a pickup in drilling aided by an economic recovery is expected to drive average natural gas prices to $5.48/Mcf next year.
According to the EIA, there will be less electricity used this year, with total retail sales projected to dip by 2.7 percent. Among industrial consumers, the decline will be around 10 percent. Should an economic recovery materialize next year, consumption will pick up 0.8 percent.
Despite the cutbacks in electricity usage, the EIA reported that residential power prices rose 7.5 percent from January through May because last year's high prices were passed on to homeowners. Later this year, cheap fuel prices will finally reach consumers and shave annual average growth to about 4.2 percent this year, and 2.6 percent in 2010 [Kristina Shevory].
* 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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