Western Price Survey
November 18, 2005
Maintenance-related transmission constraints yielded to a jump in the price of natural gas as the primary driver guiding the cost of power on Western wholesale markets this week. A Monday-through-Wednesday uptick in electricity prices was primarily linked to the 48-hour derate of the 500 KV Devers-Palo Verde transmission line. That line, which runs from the major transfer point at Palo Verde in Arizona into Southern California, was removed from service for scheduled maintenance on Wednesday.
The effect of the derate on power prices was illustrated in trading at the Palo Verde hub. While peak-time power attracted between 49 mills and 65 mills/KWh during the first two days of the week, by Wednesday the cost of peak power at PV took a run up to 79 mills/KWh. Low-demand power at Palo Verde moved for between 43.50 mills and 60 mills/KWh during the first three days of the week. Prices climbed to a high of 83 mills/KWh in Thursday trading in response to a run-up in the cost of gas.
A drop in temperatures in the Midwest and on the Eastern Seaboard in the latter half of the week brought about a rise in the price of gas, which, in turn, drew the cost of electricity upward. Still, by Friday gas costs dropped once more, bringing down electricity prices too.
The price for power delivered south of Path 15 also was on an upswing early this week. After opening on Monday at between 69 mills and 77 mills/KWh, daytime power at the hub traded for as much as 93.25 mills/KWh on Thursday.
Even nighttime deliveries experienced a healthy gain in value. SP15 off-peak power moved for a low of 54.50 mills/KWh Monday, but ran up to 74 mills/KWh on Thursday in trading for weekend deliveries. By Friday the cost of peak-time power at SP15 sank to between 72 mills and 77 mills/KWh, while off-peak power traded in the mid-sixties. This pattern, played out at all Western hubs, is contrary to the norm, when prices for weekend power traded Thursday tend to slip and then regain some footing in Friday trading.
North of Path 15 peak power attracted close to 75 mills/KWh on Monday before ratcheting up to a high of 93.50 mills/KWh during Thursday's session. The close of the week saw the price dip to between 73.75 mills and 77 mills/KWh, just about where the SP15 price settled on Friday. Low-demand power in Northern California drew close to 60 mills/KWh during the first half of the week. After scooting up to 74.50 mills/KWh on Thursday, the price slipped to between 65 mills and 67 mills/KWh the next day.
Mid-Columbia daytime power traded within a fairly narrow band between 61.50 mills and 64 mills/KWh on Monday. Another 15 to 20 mills was tacked on for electricity traded Thursday and scheduled for weekend deliveries. Mid-C peak power closed out the week trading for between 62.50 mills and 66 mills/KWh. Off-peak power at Mid-C ranged from a low of 53.50 mills/KWh at the beginning of the week up to a high of 73 mills/KWh on Thursday [Shauna O'Donnell].
East Coast Cold Leads Prices Up
The first really bitter cold snap blew through the middle of the country this week, settling finally on the East Coast. Temperatures east of the Mississippi hovered between 5 and 20 degrees Fahrenheit below seasonal norms, and forecasts peg the East Coast as experiencing colder-than-normal temperatures through next week. In contrast, California is experiencing unseasonably warm weather. With much of the winter heating-fuel demand coming from the East, any drop in the mercury is almost guaranteed to push natural gas costs higher in that region, and a predictable echo effect is typically recorded in the West.
Southern California border gas opened the week trading for between $5.80 and $7.15/MMBtu before exceeding $10/MMBtu on Thursday. Gas entering California at the northern border receipt point at Malin was valued at between $7.25 and $7.55/MMBtu at the start of the week. The price increased steadily during the next three days, topping out at $10.29/MMBtu on Thursday.
The Energy Information Administration reported an injection of 53 Bcf for the week ending November 11, and gas values promptly sank on the spot market the next day. Gas delivered to Topock slipped to between $7.50 and $9/MMBtu on Friday, while Malin gas ranged from $7.98 to $8.75/MMBtu. Producing-basin gas was not immune to the up-and-down nature of prices this week. Permian Basin gas went from a Monday low of $5.99/MMBtu to a high of $9.77 on Thursday, then fell back to between $7.20 and $8.80/MMBtu on Friday [S. O'D.].
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