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Western Price Survey

Week's End Edition
August 24, 2007
Hasta Luego: Wholesale Prices Fall After Dean Fizzles Over Mexico

With Hurricane Dean dissolving into rain over the Sierra Madre ranges in Mexico, having avoided U.S. oil and gas infrastructure in the Gulf of Mexico, day-ahead power prices at all the Western hubs dropped all week from Monday's highs, before recapturing their typical strength on Friday in trades for weekend power deliveries.

Northern California warmed up a bit this week. Seasonably hot temperatures are still spread across inland California and the Desert Southwest, keeping peak demand close to the 45,000 MW mark, according to the Cali-fornia Independent System Operator. But with no major unplanned generation outages in California and all the West's nuclear plants up and running, high demand is being easily met.

Electricity prices followed lower natural gas values until Friday, when weekend gas trades continued their slide while power gained substantially.

North of Path 15 peak power traded as high as $77/MWh on Monday but dropped to $55.50/MWh on Thursday. Off-peak moved from $44.50 Monday to average less than $39 Thursday. Both North and South of Path 15 peak showed resumed strength Friday, and went no lower than $62 in the north and $60 in the south.

At Palo Verde, high-demand power peeked above $80/MWh Monday but dropped to a low of $57.85 by Thursday. Friday high temperatures in parts of Arizona were as much as 5 degrees above normal, with Phoenix at 108 degrees, but prices for peak power didn't move much Friday. Thunderstorm activity is expected to bring down temperatures by nearly 10 degrees over the weekend. But low temperatures, which are forecast to be as much as 11 degrees warmer than average, could help explain why nighttime power surged $7 on Friday -- reaching above $40/MWh for the first time this week.

Daytime power prices at the California-Oregon border reached $72.50/MWh Monday and dropped to as low as $54 for Friday deliveries. Off-peak deliveries hovered in the low 40s until a big rebound Friday matched last week's prices for weekend deliveries, topping out around $48/MWh.

Further north, Energy Northwest detected a hydraulic leak late Monday at its 1,120 MW Columbia Nu-clear Generating Station, forcing a ramp-down. By Wednesday, the U.S. Nuclear Regulatory Commission re-ported that the generator was back at full power.

At Mid-Columbia, peak found $67.50/MWh Monday but slid to $50 Thursday. Nighttime prices barely budged, averaging less than $40 all week until a move up Friday added more than $6 [Charles Redell].

The Path Not Taken Offers Relief

Spot gas fell every day, everywhere this week. The main story was what Hurricane Dean didn't do.

Despite being the third-strongest hurricane to make landfall in Mexico in recorded history, Dean's trajectory had the U.S. gas and oil industry breathing a sigh of relief even before the Category 5 blow weakened over the Yucatan. After a big holler, momentum fizzled, in a fashion reminiscent of a certain 2004 presidential candidate.

Gas everywhere gave up last week's gains and more. Southern California and Malin shed more than 19 per-cent from last Friday's prices, each losing around $1.25/MMBtu from last Friday. The biggest drops came Mon-day and Tuesday.

The proportion and extent of the declines in Permian and San Juan prices were only slightly smaller, with losses of well more than a dollar -- between 17.5 and 18 percent at both hubs.

Once again, under other circumstances, storage injections below expectations could have boosted prices. But burgeoning underground storage was essentially a non-issue this week. The U.S. Energy Information Administration reported Thursday that 23 Bcf went into storage last week. The lower 48 states are now 12.8 percent above the five-year average.

Economic considerations should not be discounted in longer-term price momentum in gas. Oil was tamped below $70 per barrel but got a small boost on Friday on strong economic reports, including home sales and consumer spending. A stronger rise may have been kept in check by confirmation from the Mexican oil in-dustry that it was able to avoid major damage from Dean [Alan Mountjoy-Venning].

Western Electricity Prices
Week's End: August 20 - 24, 2007
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 11.90-187.21 9.59-36.99
Mid-Columbia 50-67.50 36.25-47.25
COB 54-72.50 39.80-48
NP 15 55.50-77 37.65-48.25
SP 15 55.50-78 37.25-48
Palo Verde 57.85-80.25 31-41.50

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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