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Western Price Survey

Week's End Edition
November 13, 2009
Power Prices Fall With Natural Gas

Despite the start of the winter heating season, natural gas inventories continued to grow last week and kept power prices in check.

Working natural gas in storage set a new record high, rising by 25 Bcf to 3.813 Tcf last week, the U.S. Energy Information Administration reported. Inventories, which have been setting fresh record highs for the last seven weeks, now exceed last year by 10 percent and the five-year average by 12 percent.

Western storage levels grew by 7 Bcf to 521 Bcf, a new record high, and are now 11.6 percent above last year and 14.8 percent higher than the five-year average.

Spot Western natural gas prices, which dropped about $1/MMBtu on average, added fuel to declining power trades, with several hubs trading well below $3/MMBtu on Friday.

Not surprisingly, electricity prices tumbled across the West this week. Trading was suspended on Wednesday on the IntercontinentalExchange in observance of Veterans Day, with power bought and sold on Tuesday marked for Wednesday and Thursday delivery.

Electricity demand provided little support for prices, with power usage descending from 31,100 MW on Monday to 30,600 MW on Thursday, according to the California Independent System Operator. Usage is projected to continue declining to 29,200 MW on Friday. As for the coming week, demand is not likely to rebound: California will have sunny skies and warmer weather, with temperatures rising from the high 50s into the lower 60s by Monday in San Francisco, and climbing from the high 60s into the high 70s in Los Angeles. Phoenix will say goodbye to the rain this weekend and welcome the sun and the mid-70s.

California peak trades dipped $5 to $34.61/MWh at North of Path 15, while South of Path 15 slid $6 to $32.33. Off-peak prices decreased $3 to $26.25 in the north and $4 to $23.19 in the south.

Daytime Palo Verde values tumbled $10 to average $25.79/MWh; average nighttime values fell $5 to $22.83.

As for the Northwest, temperatures will start to creep up through Monday from the high 40s to the mid-50s in Seattle and Portland, according to the National Weather Service. Mid-Columbia prime trades declined $8 to an average of $30.68/MWh on Friday, while nighttime deliveries fell $6 to $27.13. At the California-Oregon border, peak prices slipped $9 to average $33.65; average off-peak prices dipped $6 to $28.32.

What's Ahead:
A boom in natural-gas drilling across the country has muffled gas prices and kept storage levels high. Last month, the Henry Hub spot price averaged $4.12/Mcf, or $1.06/Mcf less than in September. Average prices are only expected to inch up to $4.22/Mcf this month and will bob around $5/Mcf this winter, according to the EIA.

The winter heating season, which began Nov. 1 and runs through March 31, started with the highest volume of natural gas ever recorded, according to the EIA.

The recession has sharply curtailed energy demand, but it won't last long, according to two reports released earlier this week. The International Energy Agency, a Paris-based energy-policy adviser, expects world energy demand to climb 40 percent by 2030. The bulk of the increase will come from developing countries.

According to the IEA, global oil demand, which had dropped over the last two years thanks to the recession, is projected to rise 24 percent to 105 million barrels a day by 2030, down from a previous 2007 estimate of 116 million barrels a day. Global demand for electricity will spike 76 percent by 2030, and will require 5,000 GW in new power plants.

The EIA also increased its world oil-demand outlook by 1.26 million barrels next year to 84.14 million barrels per day [Kristina Shevory].

Western Electricity Prices
Week's End: November 9 - 13, 2009
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 26.14-183.29 11.62-88.77
Mid-Columbia 30-40.50 26.50-35
COB 33.25-43 27-35.25
NP 15* 34.25-41.75 26.25-30.25
SP 15* 31.75-40 23-28
Palo Verde 25-37 18.50-29.25

* 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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