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Western Price Survey

Week's End Edition
August 17, 2007
High Wholesale Prices Return With Heat, Hurricanes and Bad Mortgages

Prodded by heat and fretting natural gas and oil markets, Western spot power trades made faint the memory of last week's lower prices. Peak power in some areas reached prices not seen in more than a year.

Buying gas to generate power got more expensive this week. Natural gas spot prices leapt Monday in the biggest one-day move since January. Average prices at Malin climbed 70 cents over Friday, something that surely didn't es-cape power traders' notice.

The spike in natural gas prices is most likely due to a pick-up in tropical storm activity. Tropical Storm Erin made landfall in Texas north of the Mexico border Thursday, while Hurricane Dean is already a Category 3 hurricane due to enter the Gulf of Mexico near the Yucatan Peninsula next week.

Erin's winds and waves are not likely to damage Gulf gas rigs, but there is worry the storm could disrupt oil and gas operations in Texas, which is already flooded. Dean's direction and potential are heightening worries of turmoil in the western Gulf and Texas.

Extreme volatility in financial markets also has influenced commodity trades, including energy. This week's oil inventory report showed a larger-than-expected drop in crude and gasoline inventories, and oil futures fell to a key level just above $70 before rebounding Thursday in global financial markets that have been chaotic from the sub-prime loan fiasco.

California Independent System Operator data showed load grew each day through Wednesday's max of 43,461 MW before settling down to Friday's expected high in the range of 42,700 MW.

Above-normal temperatures, ever the prime suspect in high wholesale prices, continue in the Southwest, with highs two to five degrees above normal in some of the hottest areas. That's saying something when the normal high in some areas is 102 degrees. In the Northwest, Seattle's high temperatures were four to nine degrees above normal early in the week before a chill descended late Wednesday.

Averages at Palo Verde are up more than $35 from last week's bottom. Peak prices hit a $93.50/MWh high on Monday, moving only slightly lower by Wednesday. Palo Verde peak dipped to the week's low of $68 on Thursday. Off-peak prices were more subdued, but rose to $49 by Friday, more than 50 percent above last week's values.

Peak power at South of Path 15 found $90/MWh Monday, almost $20 above last Friday's highest price. Other than the high prices in the first week of July, SP15 hasn't reached $90 in over a year. Nighttime power was most volatile Monday, moving between $42 and $50, until Friday's trades pushed prices as high as $52.75. North of Path 15 prices were largely in tandem with SP15.

Prices for Mid-Columbia power moved in concert with cool weather in the second half of the week. Average daytime prices swelled from $65/MWh Monday to $74.24 Wednesday, a mark $20 above last week's values, then set-tled down. Nighttime power found a summit of $47 on Friday [Alan Mountjoy-Venning].

Natural Gas Traders Skittish

Getting under way with the first active hurricane season since the devastation of 2005 clearly worries traders. Gas markets are much like other fast exchanges in that uncertainty often hits harder than clearer knowledge of what's to come.

As traders fretted over Tropical Storm Erin and Hurricane Dean, Southern California and Malin gained 13 and 14 percent respectively on average prices for the week. Permian, San Juan and Alberta gas averaged more than 8 per-cent higher than last Friday by week's end.

In a normal situation, the rather paltry injection of 21 Bcf shown in the nation's weekly natural gas storage report might spark real strength in short-term trading. But storage is 371 Bcf ahead of the five-year average, though 108 Bcf over last year's level. Gas could cross the 3,000 Bcf threshold in August, usually not reached until October. But late-week, day-ahead trades were barely affected by the report.

Hurricanes and roiling financial markets -- with some evidence that investors everywhere were dumping volatile holdings including commodities -- seemed to be larger players. If Hurricane Dean makes a Gulf landfall as a Category 4 storm, don't expect calm in next week's market either [A. M-V.].

Western Electricity Prices
Week's End: August 13 - 17, 2007
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 30.82-998.46 25.31-169.67
Mid-Columbia 57-79 36.50-47
COB 61.50-92.25 40-48
NP 15 64.50-87 42.25-52.70
SP 15 64.50-90 42.50-52.75
Palo Verde 68-93.50 38.25-49

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

The Western Price Survey is excerpted from Energy NewsData's comprehensive regional news services. See for yourself how NewsData reporters put events in an accurate and meaningful context -- request a sample of either or both California Energy Markets and Clearing Up.

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

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