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Western Price Survey

Week's End Edition
November 6, 2009
Power, Natural Gas Prices Wilt

Electricity prices tumbled this week as natural gas prices extended their declines and power demand remained even.

High storage levels of natural gas and warmer-than-average temperatures have pushed natural gas prices lower. Western spot prices for gas closed down about 60 to 70 cents/MMBtu this week, and ranged Friday from an average of $3.63/MMBtu at the San Juan Basin to $4.21 at PG&E's CityGate.

Meanwhile, temperate weather across the Golden State this week kept power demand tame, with peak usage falling from a high of 31,500 MW on Monday to 30,600 MW on Thursday, according to the California Independent System Operator. On Friday, peak usage is likely to drop to 29,200 MW.

Since Monday, daytime California prices slid $8 to average $39.78/MWh at North of Path 15 and $37.95 at South of Path 15. Average nighttime values were flat, settling at $32.39/MWh in the north and $30.40 in the south.

Palo Verde peak trades dropped $5 to average $35/MWh, and off-peak values were mostly flat around $29.

The advent of a large Pacific storm didn't lift power prices this week in the Northwest. At the California-Oregon border, peak trades gave back $4 to average $38.93/MWh, while off-peak values fell over $3 to $29.93.

Average Mid-Columbia prime values dipped $3 to $35.99 and off-peak trades dropped $2 to $29.16/MWh.

A storm from the Pacific will continue to dump rain and bring gusty winds to the Northwest through Monday. Temperatures will be in the low 50s in Seattle and Portland.

Rain doused Northern California on Friday, but the region should see mostly sunny skies through the weekend and Monday. Temperatures will be in the low 60s in San Francisco. Los Angeles will bask in sunny days with temperatures that will creep into the high 70s by Monday.

Big Western nuclear plants are still undergoing maintenance and repairs this week in advance of winter heating demand. The reactor vessel heads at Palo Verde's 1,336 MW second unit and Diablo Canyon's 1,130 MW second unit are both being replaced and will return to full power when the swaps are completed. The San Onofre Nuclear Generating Station's 1,070 MW second unit is off line for three months while its two steam generators are replaced.

Cheap, Abundant Natural Gas?

Natural gas prices continued their march south after weekly inventories grew and oil prices slumped on dismal economic news. On Friday, the Labor Department said the unemployment rate hit 10.2 percent, the highest level since 1983. December crude closed at $77.39 per barrel on Friday and December natural gas settled at $4.60/MMBtu, down 22 cents for the week.

For the sixth week in a row, natural gas inventories climbed to fresh highs. Last week, operators tucked 29 Bcf of gas into storage, boosting inventories to 3.788 Tcf, according to the U.S. Energy Information Administration. Levels stand 11.1 percent above last year and 12.3 percent higher than the five-year average.

The International Energy Agency predicts natural gas prices will continue to fall in the coming decades as new gas fields come on line and plans to reduce carbon emissions go into effect. In a draft report, due for official release on Tuesday, the IEA predicted natural gas demand would peak in the early 2020s.

Energy experts are also predicting the United States will have plentiful supplies of natural gas in the coming decades, owing to advances in shale-gas drilling. Daniel Yergin and Robert Ineson of Cambridge Energy Research Associates, writing in The Wall Street Journal (see The Clips), point out that proven reserves in the U.S. "have risen to 245 Tcf in 2008 from 177 Tcf in 2000, despite having produced nearly 165 Tcf during those years."

The authors predict natural gas will be the generating fuel of choice in the coming years and will help facilitate the development of renewable power, strengthen U.S. manufacturing, and transform international politics [Kristina Shevory].

Western Electricity Prices
Week's End: November 2 - 6, 2009
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 33.38-717.01 23.36-55.90
Mid-Columbia 34.75-45.50 24.25-35
COB 38.25-48 26-35
NP 15* 39.50-48.50 28.75-33.50
SP 15* 37-47.50 26.75-32.50
Palo Verde 34.50-43.25 24-32

* 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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