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Western Price Survey

Week's End Edition
September 26, 2008
Power Prices Sway on Mortgage Bailout; Lifted by Heat, Demand

Electricity prices this week climbed modestly on the back of a temperature rise across much of the West and on higher demand.

Economic fears that the federal government won't pass a financial sector bailout deal have played havoc with commodities, however. Investors first flooded the market and pumped up crude and natural gas prices early in the week but then fled commodities when a deal seemed to fall apart later in the week.

The Golden State warmed this week and temperatures were climbing into the high 80s in Los Angeles and the triple digits in Palm Springs. Even San Francisco will likely see temperatures move into the low 70s this weekend. Over the next few days, temperatures are expected to rise 5 to 10 degrees in the state's Central Valley and high desert, AccuWeather said. Phoenix will see sunny skies and a high of 101.

Rising temperatures pumped up electricity demand this week, with usage climbing from 33,100 MW on Monday to 39,500 MW on Thursday, the California Independent System Operator said. This weekend, demand is projected to dip to 37,800 MW.

Since Monday, California prime prices eked out a modest increase of nearly $1 to an average of around $63/MWh for North of Path 15 and South of Path 15. Off-prime values rose $9 to an average of around $51 at both hubs.

Palo Verde peak power shed 36 cents on average to $53.12/MWh, while off-peak trades rose $8 to $44.88/MWh.

The Northwest will warm this weekend, with temperatures creeping into the low 70s and 80s in Seattle and Portland. The clouds will depart and leave clear skies.

The California-Oregon border saw peak prices rise through Wednesday to $65.93 and then fall to an average of $64.97/MWh by Friday, which was still $3 above Monday's prices. Off-peak average values added $12 to $55.98/MWh.

Over the week, average daytime Mid-Columbia prices rose $4 to $61.60/MWh. Average nighttime trades climbed $11 to $55.90.

The San Onofre Nuclear Generating Station's second and third units were still operating at less than full capacity this week. The second unit was nearly back at full capacity on Friday, while the third unit was still at 75 percent capacity. Both units, which can generate around 1,080 MW, have been down for maintenance on their water pumps. Palo Verde's 1,247 MW third unit came back on line on Tuesday following repairs to its control element drive mechanism motor generator [Kristina Shevory].

Market Turbulence Wreaks Havoc On Natural Gas Prices

Natural gas prices had risen steadily through Thursday on the back a surge in oil prices, which gained $25 in one session on Monday, and concerns that storage could dry up this winter.

On Monday, Chesapeake Energy said it would slash its drilling expenses by 17 percent through 2010 in light of falling natural gas prices this year. Other producers were expected to follow suit, leaving fewer rigs producing gas next year.

Such dire forecasts would ordinarily send prices higher, but on Thursday, gas values began to nosedive with no bank-bailout package in sight. On Friday, the typical lower-demand weekend pattern pushed some prices further into the valley. Most notable was the San Juan Basin, which traded as low as $2.75/MMBtu Friday after selling as high as $5.29 on Wednesday. Southern California Border gas, meanwhile, dropped to a low of $5 after trading as high as $6.23 earlier in the week.

The price drop also ignored the slow production recovery in the Gulf of Mexico following Hurricane Ike. Nearly 53 percent of the Gulf's natural gas facilities remained closed.

Mild weather helped boost the weekly injection of natural gas past 3 Tcf for the first time this year, the U.S. Energy Information Administration said. Stockpiles climbed by 51 Bcf to 3 Tcf, about what was expected, but injections could have been higher were it not for so many shuttered platforms in the Gulf of Mexico. Compared to last year, storage is now 5 percent lower, yet it remains 1 percent above the five-year average. The West saw storage increase by 12 Bcf to 411 Bcf. Inventories are 2 percent below last year and 3 percent above the five-year average [K. S.].

Western Electricity Prices
Week's End: September 22 - 26, 2008
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 17.48-732.92 7.60-146.94
Mid-Columbia 56.75-64 38.50-57.50
COB 61.50-68 39.50-57
NP 15 62-73.50 40.75-52.55
SP 15 61.50-73.25 40.50-52.25
Palo Verde 50.75-58.50 31.50-45.50

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


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