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Western Price Survey

Week's End Edition
October 2, 2009
Power Prices Slip on Low Demand, Cool Air, Plunging Natural Gas

Falling Western natural gas prices, cooler weather and slumping power demand hit electricity prices this week, sending them significantly lower. California daytime trades recorded the biggest drops in the West, sliding an average of $7 to $9/MWh.

West Coast spot natural gas prices slumped from $1 to $1.50/MMBtu on average. Prices closed Friday noticeably lower, with averages between $2.20 and $3.13/MMBtu.

Cooler air pushed down electricity prices, sending peak California trades tumbling $9 to average $34.14/MWh at North of Path 15 and $7 to $33.25 at South of Path 15. Off-peak values declined more than $2 to average $26.02/MWh in the north, and $3 in the south to $23.47.

Average Palo Verde daytime prices plunged $7 to $26.10/MWh, and nighttime values were off $2 to $19.75.

Peak usage for power steadily slipped from 35,000 MW on Monday to 32,000 MW on Thursday, and was on pace to hit 31,200 MW on Friday and Saturday, according to the California Independent System Operator.

Prime Mid-Columbia prices fell over $4 to average $34.70/MWh, while off-prime values inched up $1 to $31.36. California-Oregon border prices were nearly identical (see chart).

Natural gas futures on Nymex have been erratic this week, with no clear direction. They have been rising on the advent of colder weather and an uptick in crude prices and falling on dour economic signs and building supplies. On Friday, the November contract ended trading at $4.71/MMBtu, up 21 percent compared with Monday's close of $3.73/MMBtu.

Spot prices are a good sign of where natural gas demand is and can influence five-year front-month contracts. Last week, Henry Hub prices were 55 percent, or $3.93/MMBtu, below last year and have been trading below previous-year levels since Oct. 6, 2008, the U.S. Energy Information Administration said.

But looking ahead to November natural gas prices, it seems like the market is pricing in a rally and supply squeeze. On Monday, the October contract expired at $3.73/MMBtu, while November natural gas traded at a premium of 29 percent, or $1.10/MMBtu, besting the previous record of 26 percent set three years ago. New front-month contracts typically trade within 5 percent of the price of the expired contract.

Natural gas in underground storage set a new record high last week, aided by warmer-than-usual weather, and blasted past the previous 15-year and all-time high of 3.565 Tcf set two years ago. Stockpiles rose by 64 Bcf to 3.589 Tcf last week, exceeding the year-ago and five-year average by 15.8 and 15.5 percent, respectively, according to the EIA.

New record supply levels were also set in the Producing and Western regions, and the East is only 86 Bcf below its 15-year high. Western supplies clocked in at 489 Bcf, up 7 Bcf, and bested the previous record high of 482 Bcf. Currently, stockpiles are 16.2 percent higher than in the same period last year, and 17 percent greater than the five-year average.

The recession, anemic demand and a large supply overhang have traders debating where the natural gas market will go. Through July of this year, volumes of natural gas delivered to industrial customers have fallen about 19 percent, from 577 Bcf in January to 467 Bcf in July, according to the EIA. In fact, the EIA said Thursday in its weekly Natural Gas Update, industrial consumption has remained below the five-year range, or the range of minimum and maximum levels of industrial consumption over the past five years, throughout 2009.

In July, the most recent date available, natural gas shipments to industrial customers plunged 10 percent over the previous year, and 11 percent versus the five-year average, according to the EIA.

Several nuclear plant units went down this week, beginning last Saturday with the Columbia Generating Station. The 1,150 MW unit has been shut down, and spokespeople did not return calls for comment. The San Onofre Nuclear Generating Station's 1,070 MW second unit was taken off line on Sunday to replace two steam generators over the next three months. The 1,080 MW third unit closed on Friday, but spokespeople did not return calls for comment [Kristina Shevory].

Western Electricity Prices
Week's End: September 28 - October 2, 2009
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 13.20-44.63 9.60-25.39
Mid-Columbia 31.50-40.25 27-34
COB 35-42 28-34
NP 15* 34-44 25.75-29.50
SP 15* 32.25-41 23-27.50
Palo Verde 25-34.50 19.25-24

* 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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