Western Price Survey
August 19, 2005
If there is one thing that is certain these days in electricity trading, it is that the price of natural gas is uncertain. Natural gas is the fuel of choice for much of the power-generation fleet in the West, and price volatility of the commodity both pressures the cost of electricity upward and simultaneously makes the next-day price of power unpredictable in its own right.
Over the past two weeks the cost of natural gas on the Western spot market has increased by more than $1.00/MMBtu at nearly all Western hubs. While gas prices in the West continue to be lower than in other regions of the country, the commodity cost remains the driving force behind the high price of power. And yet, as if to contradict this last statement and to underscore the difficulty in attributing causation to the movement of electricity prices, the price if natural gas and that of elec-tricity diverged markedly on Friday, when gas costs tumbled and power prices scooted upward.
The price of peak power in Northern California ranged from a low of 73 mills/KWh recorded on Thursday to a high of 83 mills/KWh the following day. Off-peak power prices at NP15 steadily increased as the week wore on, with the price positively soaring on Friday. After trending in the low to mid-fifties during the first four days of the week, off-peak power traded for between 63.25 mills and 65.50 mills/KWh that day.
Daytime power south of Path 15 opened on Monday in the range of 77 mills to 83 mills/KWh before slipping as low as 73.25 mills/KWh for power scheduled for weekend delivery. After trading for between 51 mills and 52.75 mills/KWh to open the week, low-demand power changed hands for a few mills more than on Wednesday. On Friday the price really took off, moving up as high as 65.75 mills/KWh.
As it tends to do, the price of California-Oregon border power roamed midway between the price of California power and that of Mid-Columbia power this week. Peak power at COB attracted as much as 76.50 mills/KWh on Monday before fading to a range of 68 mills to 69 mills/KWh the next day. By the end of the week the price was back in the range of 73 mills to 76.50 mills/KWh. Off-peak power at COB changed hands for between 50.50 mills and 56 mills/KWh during the first four days of the week. By Friday the price of nighttime power had swelled by nearly 10 mills, closing the week at 64 mills/KWh.
Mid-Columbia power values did not trail too far behind COB prices at the start of the week. The price of peak-time power traded at Mid-C on Monday was between 68 mills and 69.25 mills/KWh. After sagging a bit at midweek, the commodity moved for as much as 73 mills/KWh on Friday. Off-peak power at Mid-C hovered just below 55 mills/KWh during much of the week, taking off only on Friday, when the price hit a high of 62.50 mills/KWh.
California Independent System Operator load figures have stayed comfortably below the 40,000 MW mark this week, topping out on Wednesday at 37,867 MW. The supply-demand balance also experienced little pressure from generation shutdowns in the region. The most significant plant outage this week was the continued shutdown of Palo Verde Nuclear Generating Station Unit No. 1. The 1,243 MW unit went off line late last week to repair a problem with an emergency diesel gen-erator. Very few other generating units of any significant capacity were listed as unavailable this week by Cal-ISO, for either planned or unplanned reasons.
The Energy Information Administration released its "Monthly Flash Estimates of Electric Power Data" this week. The most recent numbers--for the month of June--demonstrate growth in demand as well as an increase in the retail cost of power for the United States as a whole. According to the EIA, retail sales of electricity were 3.9 percent higher for the month of June than in June 2004. The increase in sales was matched by an average increase in price of 4.2 percent. Overall, the country saw a 5.1 percent growth in generation from June 2004 to June 2005. Natural gas-fired plants led the pack, accounting for 17.3 percent of the increase in generation.
Authorities were investigating a possible explosion at an underground Pacific Gas & Electric transformer in San Francisco Friday morning.
The explosion occurred in front of a busy upscale outdoor mall just before 10 a.m. It blew off a manhole cover, shattered nearby building and car windows, lit awnings on fire and charred nearby buildings. A 41-year old woman who was walking nearby when the explosion occurred was taken to the hospital with burns on her head and neck that were described as serious but not life-threatening.
Although the cause of the explosion is not yet known, San Francisco Deputy police chief Mor-ris Tabak said investigators speculated that a transformer below the street may have blown up.
Because a terrorist attack was initially feared, all of the nearby buildings were evacuated, and hundreds of workers were flushed out onto safe streets. Hours after the explosion, police said that they did not think terrorism was involved.
PG&E spokesperson Paul Moreno confirmed that the location of the incident was in an electri-cal underground vault that houses transformers and other equipment [Shauna O'Donnell and ].
Gas Rides the Oil Seesaw
As noted in the Energy Information Administration's "Natural Gas Weekly Update," the amount of natural gas in the nation's underground storage facilities continues to exceed the five-year average. Still, the actual amount injected into storage on a weekly basis has been below the five-year average and in fact the 2,515 Bcf in storage as of August 12 lags behind last year's quantity at this date by 4 Bcf.
The price of natural gas remains volatile, to say the least. After hitting a high of $9.12/MMBtu on Wednesday, the spot price Permian Basin dropped to a week's low of $7.83/MMBtu in Friday trading. Most Western receipt points followed a similar pattern--spending the first half of the week in the low to mid $8 range before slipping back into the mid $7 range on Friday.
Crude oil prices continued to pressure gas costs this week, but those too saw some relief at the end of the week, hovering at about $63.50 per barrel, down from last week's record high of $67.10/barrel [S. O'D.].
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