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Western Price Survey

Week's End Edition
August 28, 2009
Heat Gives Little Lift to Power Prices

Electricity prices gained more ground this week as heat built across the West and drove up power demand, but price increases were small, even with searing temperatures.

Western trading hubs logged average increases this week from $3 to $6/MWh -- which is what one would expect for higher-demand patterns on Monday -- despite temperatures of 101°F in Los Angeles and 114 °F in Phoenix.

Demand for power on the grid steadily increased from 37,600 MW on Monday to 43,400 MW on Thursday, according to the California Independent System Operator, and was expected to rise to a weekly high of 44,200 MW on Friday.

Last year, such demand and higher temperatures might have sent power prices soaring. Earlier in the summer of 2008, power prices routinely exceeded $100/MWh. Even in late August 2008, as natural gas prices began to fall, peak power was trading between $70-$80/MWh in most Western hubs -- more than twice the going rate today.

Not inconsequentially, natural gas prices last year remained much higher than today's levels.

But with natural gas now priced between $2-$3/MMBtu at most Western hubs, this week California peak prices gained just $3 across the state, settling at an average of around $34/MWh at North of Path 15 and South of Path 15. Average off-peak prices rose $5 to between $25-$26/MWh in the north and south.

Since Monday, average Palo Verde daytime prices recorded a $5 increase to $32.40/MWh. Nighttime trades were up $6 to average $22.75.

High temperatures, low humidity and tinder-dry brush have combined to spark new wildfires across California this week. California Gov. Arnold Schwarzenegger declared a state of emergency in Monterey and Los Angeles Counties today in the wake of four wildfires burning across the region. The Gloria fire in the Central Valley had burned 5,000 acres by Friday morning, threw out power to some residents and was only 15 percent contained, according to the California Department of Forestry and Fire Protection.

In the Northwest, Mid-Columbia prime values rose over $5 to an average of $38.12/MWh, while off prime prices increased more than $4 to $27.13/MWh. California-Oregon border power prices tended to trade just $1 higher (see chart).

Last week, 54 Bcf of natural gas went into storage, boosting the nation's inventory to 3.258 Tcf, the U.S. Energy Information Administration reported. While hotter weather limited the injection, stockpiles are about seven weeks ahead of the normal fill rate. Compared to a year ago, supplies are 18.8 percent higher, and 18.1 percent greater than the five-year average.

Working natural gas in Western storage rose 6 Bcf to 455 Bcf last week, putting inventories 23 percent higher than a year ago, and 20.1 percent greater than the five-year average.

Since last year, the nation's amount of natural gas storage capacity has climbed by at least 100 Bcf, according to the EIA. The uptick in storage capacity should help drillers who have been forced to close drilling operations in light of slumping prices. With storage capacity topping out, there are fewer spots to tuck natural gas, and producers have been forced to stop drilling.

The Columbia Generating Station in Washington still remains shuttered three weeks after an electrical fault sparked a fire in an overhead tray that contains electrical cables. The 1,150 MW plant will return to full capacity when repairs and an investigation are wrapped up. Meanwhile, Diablo Canyon's second 1,138 MW unit returned to full service on Wednesday, but was operating at 80 percent capacity on Friday. The unit had been closed since Aug. 13 when a monitoring system indicated problems in its transformer's bushings, which insulates power as it goes from the plant to transmission lines.

What's ahead: Temperatures were expected to remain in the high 70s in Seattle through Tuesday, though San Francisco was expected to drop to the low 60s. Los Angeles temperatures were forecast to fall to 85 °F by Tuesday, and Palo Verde, which hit a high of 115 °F Friday, was expected to drop to 106 by then [Kristina Shevory].

Western Electricity Prices
Week's End Aug 24-28, 2009
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 16.24-369.72 13-50.20
Mid-Columbia 31.75-40 22-28.50
COB 35-41.25 22.25-29
NP 15* 31-37.50 20.75-26.80
SP 15* 30.75-38 19-25.65
Palo Verde 26.25-35.50 16.50-23.90

* 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.

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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