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Western Price Survey

Week's End Edition
October 9, 2009
Electricity Prices Surge on Higher Natural Gas Values

Electricity prices shot up as much as $13/MWh across the West as natural gas prices staged some of their largest gains in weeks.

Spot natural gas prices rose this week, supported by colder weather and increased heating demand in much of the country. Spot prices in the West have gained nearly $1 since Monday to range from $3.85/MMBtu at the Permian Basin to $4.72/MMBtu at Pacific Gas & Electric's CityGate.

Natural gas for November delivery has been bobbing around its Monday close of $4.98/MMBtu this week, but dipped to $4.77 on Friday as the dollar strengthened on Federal Reserve Chairman Ben Bernanke's comments about winding down the Fed's loose monetary policy.

In California, peak electricity values climbed $8 to average $43.15/MWh at North of Path 15 and $42.19 at South of Path 15. Average off-peak trades increased $10, to $34.42 in the north and $32.23 in the south.

Daytime Palo Verde trades added $10 to average $37.88; nighttime power picked up $11 to $30.89/MWh.

Power demand didn't seem to play much of a role. In California, power usage peaked at 29,000 MW on Monday and then trended up to 29,800 MW on Thursday, the California Independent System Operator said.

Temperatures will fall through the weekend and into early next week in California, with a chance of rain appearing on Monday. By Tuesday, Los Angeles and San Francisco will see temperatures fall about 5° F into the high 60s and high 50s, respectively, according to the National Weather Service.

The Northwest will also get hit by rain in time for Columbus Day, with temperatures dipping a few degrees into the high 50s in Seattle and the low 60s in Portland.

California-Oregon border peak prices rose over $8 to average $42.66/MWh, while off-peak trades shot up $13 to an average of $39.58. Mid-Columbia prices were a few dollars off COB values (see chart).

Natural gas in underground storage hit an all-time high last week of 3.658 Tcf, pushing past the previous record of 3.565 Tcf set at the end of October 2007, the U.S. Energy Information Administration said. Last week 69 Bcf went into storage, leaving inventories about 15 percent higher than last year and the five-year average.

Western supplies notched an 8 Bcf increase to 497 Bcf, exceeding last year's levels by 15.3 percent and the five-year average by 16.4 percent.

What's ahead: This year, Americans will use 2 percent less natural gas thanks largely to the weak economy, according to the EIA's short-term energy outlook. Production, however, will continue to creep up this year, rising 1.5 percent as energy companies bring more natural gas rigs on line thanks to the prospect of a frigid winter and an improving economy. The number of working natural gas rigs climbed to 726 this week, the highest since May, according to Houston oilfield-services firm Baker Hughes.

Next year, however, production will likely fall 3.8 percent as more companies take drilling rigs off line to help boost prices and draw down record supplies.

The International Energy Agency increased its forecast for global oil demand for this year and next based on a faster-than-expected economic recovery. (Earlier this week, the International Monetary Fund raised its prediction for world economic growth to 3.1 percent next year, an increase from 2.5 percent.) The agency now expects global demand for crude oil to hit 84.6 million barrels per day this year, up 200,000 barrels per day from its previous forecast last month. In 2010, global oil demand is now expected to come in at 86.1 million barrels, an increase of 350,000 barrels.

Last Sunday, Diablo Canyon's 1,130 MW second unit was shut down for refueling and the replacement of its reactor vessel head. Over a week ago, the San Onofre Nuclear Generating Station took its 1,070 MW second unit off line to replace two steam generators; it will be closed for the next three months. Palo Verde's 1,336 MW second unit is off line for the next month while its reactor vessel head is swapped out. On Thursday, the 1,150 MW Columbia Generating Station was back at full power after the repair of four small valves was completed [Kristina Shevory].

Western Electricity Prices
Week's End: October 5 - 9, 2009
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 11.49-58.74 8.38-44.11
Mid-Columbia 30.75-42 24-39.50
COB 33-43 26-40.25
NP 15* 34.50-44.50 23.75-34.50
SP 15* 33-43.50 21.50-33
Palo Verde 26.50-43 18-32

* 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.


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