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Western Price Survey

October 17, 2014
California May Face Wild Winter

California may have supply and market issues this winter from greater reliance on natural gas-fired generation, FERC said in a winter assessment released Oct. 16.

In addition to leaning on gas to replace hydro, imports are expected to decline between 1,000 and 3,100 MW due to Pacific DC Intertie maintenance. Meanwhile, FERC said, "higher solar generation will increase the evening ramp required of natural gas generation and fast-start units will increase the rate of draw from gas pipelines. Southern California enters the winter with gas storage levels 15% below last year and generators continue to face the risk of gas supply disruptions."

Futures prices are already higher, with the average of January and February contracts for South of Path 15 trading at $46.13/MWh, as opposed to $42.25 at the same time last year, according to the assessment. Mid-C futures are trading at $38/MWh, a jump of $2/MWh compared to last October.

At present, the West has the highest natural gas prices in the nation, according to FERC. In its Winter 2014-15 Energy Market Assessment, the agency stated that this is a result of "high natural gas demand over the summer from strong power generation consumption." Natural gas replaced drought-prompted decreases in hydro generation in the West. Regional prices this summer reached an average of $4.76/MMBtu at PG&E CityGate and $4.39 at Southern California Border.

Working gas in storage reached 3,299 Bcf as of Oct. 10, according to Energy Information Administration estimates, a net increase of 94 Bcf from the previous week. Storage levels are now 9.4 percent less than a year ago and 9.9 percent less than the five-year average. EIA now expects the end-of-season inventory level to be 3,532 Bcf. The five-year average peak storage amount, by contrast, is 3,851 Bcf.

Nevertheless, natural gas values in the West dropped this week, and were down 5 to 14 cents in Thursday-to-Thursday trading. Southern California Border led losers, dropping 14 cents to $3.83/MMBtu.

Average peak-power prices, meanwhile, mostly fell. Hubs lost between 70 cents and $6.40 in Friday-to-Friday trading. Palo Verde was the exception, adding $1.50 to end at $39.30/MWh. Off-peak prices, however, made nominal gains with prices up between 65 cents and $1.15 in the week (see charts) [Linda Dailey Paulson].

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


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