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Western Price Survey / Archives

August 17, 2001
Gas is Back in Driver's Seat

If anyone had any doubts that natural gas costs are the key driver of electricity prices, the lesson was brought home again this week. A tremendous spike in fuel prices, resulting from very low storage injection figures from the American Gas Association, turned the momentum of power markets around.

Or perhaps, it would be more accurate to say the fuel prices gave momentum to power markets, as previously electricity has been stuck in a trough at the 40 mills/KWh level at most trading hubs. Even though the region avoided any kind of supply squeeze and recorded loads slipped below forecasts Thursday, prices for the Friday/Saturday packages moved up a few notches to 45 mills/KWh in California and the Northwest and 50 mills/KWh at Palo Verde.

Except in the Southwest, that meant prices ended up just about where they had begun the week.

The California Independent System Operator found that projecting loads posed something of a challenge this week. It had forecast a peak of nearly 40,900 MW for Wednesday, but the actual number came in at 38,900 MW. On Thursday, Cal-ISO revised its outlook lower several times-then watched peak demand rise unexpectedly to 40,262 MW.

Though Cal-ISO had reduced its day-ahead forecast for Friday to 37,500 MW, it raised that to 38,200 MW in the morning..

There was little by way of resource news that might change the pattern. Cal-ISO reported 3,200 MW of unit outages late in the week, with much of that capacity located at just two facilities-the Long Beach complex, which had 550 MW off line and at El Segundo, where Units Nos. 1, 2 and 4 combined for 675 MW of non-availability. San Onofre nuclear Units 2 and 3 were down to 98 percent of full capacity Wednesday, but operator Southern California Edison offered no explanation for the slight cut in output.

Back in service was the 640 MW Ormand Beach No. 2. When that unit tripped last Friday afternoon, it caused a voltage drop to 59.94 Hertz that was felt throughout the grid.

Traders were not fazed by any of it. "Unless three big nukes go off at the same time, it won't change anything," said one [Arthur O'Donnell].

Gas Prices Zoom on Shocking AGA Report

Natural gas prices had been edging upward through the week but they took off like a rocket Thursday following what some traders called a "shocking" American Gas Association injection report that showed only 30 Bcf of new gas put into storage last week.

Rumors swirled in the market that the report was a mistake or anomaly, but that did not stop prices from jumping by more than $0.35/MMBtu in a single trading session at key Western borders and basins. Adding pressure was a price increase in national benchmarks, also spurred by tropical storm warnings along the Gulf coast.

While the SoCal Border/Topock price had dropped to a low $3.06/MMBtu earlier in the week, it rebounded to $3.56/MMBtu. Similarly, the San Juan and Permian basins moved upward to $3.09 and $3.42/MMBtu respectively.

The biggest jump occurred at the Alberta hub, where very heavy trading indicated a shift in supplies to the Chicago region. The AECO price had reached to as high as $4.57/Gigajoule Thursday before settling back to $4.48/Gj, but even that was far above the $3.52/Gj level where the market began the week [A. O'D.].

Western Electricity Prices
Week of August 13-17, 2001
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 42-327 26.5-43
Mid-Columbia 42-45.5 31-33
COB 40-45 31-34
NP 15 44-46.5 32-34
SP 15 41-45 28-33
Palo Verde 48-55 24.5-26.5

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


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