Western Price Survey
Week's End Edition
Caught in a vortex of conflicting forces -- turbulence in the financial markets, falling grid demand and natural gas prices -- electricity prices flew in different directions this week. Peak prices generally lost a few dollars while off-peak prices recorded modest gains.
The week's drama kicked off with Congress failing to pass a "bailout" or "rescue" package for banks holding mortgage-backed securities Monday, sending the Dow plummeting 778 points. The House finally passed the measure Friday, following the Senate's lead on Wednesday.
Crude oil prices dropped comfortably below $100/barrel as traders flew from commodities. Natural gas prices also took note, going for bargain values at many producing basins that serve the West.
Demand for power in California hit a high this week of 40,765 MW on Thursday, up more than 4,000 MW from Monday, the California Independent System Operator said. Usage was expected to drop to 32,000 MW today.
California peak electricity prices fell a modest $2 over the three-day period. Trades for peak power went for an average of $62/MWh on Friday for North of Path 15 and South of Path 15. Low-demand power gained $4 to around $49 at both hubs.
Daytime Palo Verde prices lost $3 to an average of $53.78/MWh, while nighttime values remained nearly static at $40.
At the California-Oregon border, average peak prices slipped $3 to $63.50, while off-peak trades gained $4 to $49.75. Average daytime Mid-Columbia prices dropped $2 to $59/MWh; nighttime trades picked up $3 to $48.70.
The Palo Verde nuclear station's third unit was shut off on Sunday after its main turbine tripped on high vibration, but the 1,336 MW unit came back on line Wednesday and was operating at full capacity by Friday. The San Onofre Nuclear Generating Station's third unit has been running this week at 75 percent capacity while maintenance on its water pump is being completed. The 1,080 MW unit has been down for more than a week [Chris Raphael].
Gas Prices Approach Abyss
As a sign we may be living in strange times indeed, natural gas prices this week at some Western hubs scraped levels not seen since 2002.
A number of macro-factors have been depressing natural gas prices. Producers such as Chesapeake Energy, fearing a natural gas glut, have announced plans to cut back on drilling next year. New forms of production, such as from shale, have come on line and commodity futures, for both crude oil and natural gas, have also been thrashed by the recent credit crisis.
This week, lower natural gas demand from mild weather, a storage injection and the return of some Gulf of Mexico production further depressed prices.
Approximately 87 Bcf of natural gas went into U.S. storage last week, bringing stocks 1.6 percent above the five-year average but 4.2 percent below year-ago levels.
The U.S. Energy Information Administration, in its weekly natural gas update released Thursday, attributed falling prices to "seasonably moderate temperatures" that kept in check natural gas demand while Gulf of Mexico rigs returned to gas production. Approximately 3.5 Bcf of natural gas production remains shut as a result of Hurricane Ike, a sign of progress considering that 4.2 Bcf remained shuttered one week earlier.
The EIA further cautioned "the uncertainty related to the financial markets and their possible impact on macroeconomic factors could negatively impact natural gas prices in the future."
Natural gas futures reached $7.36/MMBtu on Friday. The October 2008 futures contract closed on Sept. 26 at $7.47, the lowest near-month closing price since last December, according to the EIA.
In the West, Permian Basin gas lost an average of 50 cents/MMBtu for the week and traded for a low of $3.44 on. The Southern California border, which normally sees some of the highest gas prices among Western hubs, felt the steepest decline, as gas values plummeted more than $1.30/MMBtu over the week to settle at an average of $4.29 on Friday.
Both the SoCal border, which fell to a low of $2.75, and the San Juan Basin, which traded at the basement price of $2.55, reached values not seen since 2002 [C. R.].
Archives of the Western Price Survey for the past year are also available online.
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