Western Price Survey / Archives
November 17, 2000
Despite being forced into four consecutive days of system emergencies this week, the California Independent System Operator managed to scare up enough resources to meet load-although it was not easy given market conditions. Prices skyrocketed well above 250 mills/KWh at key market hubs and the California Power Exchange price frequently bumped up against the price cap barrier.
With a cold weather front spreading across the West and as much as 12,000 MW of generation unavailable due to deferred maintenance or other problems, Cal-ISO found reserves dipping into dangerous territory even though total peak load was only about 32,000 MW. The grid operator declared Stage Two emergencies Monday through Wednesday and moved into a Stage One late on Thursday afternoon. Again, utilities had to turn to interruptible customers to help avoid deeper problems. As much as 1,500 MW of customer load curtailments from California utilities were put into effect in the unusual 5 pm to 7 pm period.
Contributing to the situation was the continuing outage at key nuclear facilities. Although Diablo Canyon No. 1 entered restart sequence, it was holding at 12 percent of power for testing before reconnecting to the grid. San Onofre No. 2 has exited its refueling outage and was up to 20 percent Friday morning.
Transactions for power at the end of last week had already contemplated the possibility of cold weather and a resource squeeze and advanced trading foresaw prices well above 100 mills/KWh at regional hubs. Once the full extent of the problem became obvious, though, prices shot higher and have not even leveled out since.
The California Power Exchange started out at 185 mills/KWh for daytime power on Monday but spiked to 245 mills/KWh for Thursday. Bids for Friday were slightly lower at 227 mills, but individual hours on the day-of market still approached the $250/MWh cap at the Cal-ISO. Off- peak PX power rose from 111 mills to 195 mills/KWh.
Palo Verde and Four Corners peak energy was trading anywhere from 200 mills to 215 mills/KWh midweek, with off-peak going for 105 mills/KWh. In the Northwest, hydro power was again in short supply. Mid-Columbia and California/Oregon Border prices topped the CalPX price in the 250 mills to 260 mills/KWh range before easing slightly to 240 mills for weekend trades. Off-peak power at NP15 tracked a wide range from 139 mills to 160 mills/KWh at the end of the week [Arthur O'Donnell].
Gas at Border Crosses into New Territory
Natural gas prices in the West climbed to record levels this week, as a cold front pushed electric systems to the brink and residential gas users turned up the heat. Not only did San Diego Gas & Electric set a new record for gas deliveries this week, it had to curtail gas to large customers in order to keep the system in balance.
While there were widespread rumors of gas delivery problems, the major difficulty was experienced by distant gas producers trying to cram fuel into pipelines headed into California. The Southern California Border price hit $8.50/MMBtu midweek before dropping to $8.10/MMBtu. Other hubs picked up substantial gains during the week. but only the San Francisco CityGate and Malin prices kept to the astronomical pace set by Topock.
Another factor in the psychology of pricing was the strong withdrawal from storage fields. nationally, withdrawals overtook injections, helping to push NYMEX prices temporarily higher. But in the West, the situation is even more extreme, as much as 1.5 Bcfd of gas is being pulled from storage and little is going back in because of heavy demand from power generators. Sources said storage levels are roughly 40 percent lower this year than last, and traders worried about the upcoming months if weather is extremely cold for long periods.
"With loads the way they are, we need to pull from storage," one trader said. "Everything coming into the state is full."
Southwestern basin prices were seen in the $5.50 to $5.60/MMBtu range by the end of the week, after being as high as $5.85 earlier.
In Canada, some shut-ins caused by NOVA system constraints kept a lid on prices, but the Alberta index still remained in the $(c) 7.60/Gigajoule vicinity [A. O'D.].
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