Western Price Survey / Archives
November 22, 2000
For the second week in a row, California endured system emergencies related to disappearing generation. This time, unexpected problems at two nuclear plants upset the balance of supply and pushed market prices above the 200 mills/KWh mark throughout the West. As traders packaged combined deals for the Thanksgiving holiday weekend, there was some price erosion outside California. Some, however, think prices will remain high into next week because of the huge increase in natural gas prices.
Diablo Canyon No. 1 was attempting to return to service early Monday morning and had reached 46 percent of output, but what was called a "spurious rate trip" brought the unit back down to hot standby. On Wednesday morning the status report from operator Pacific Gas & Electric said the plant was back to 20 percent of capacity. On Saturday, Palo Verde No. 2 crashed but was able to quickly restart; midweek the unit was nearing full capacity.
The California Independent System Operator, still nursing a hangover from last week's tense operations, went into an unusual series of staged alerts on Sunday and Monday. After declaring a need for up to 3,000 MW of supplemental energy to balance loads, Cal-ISO moved into a Stage Two emergency late Monday. While still on a "no touch day" alert, the operator had not declared a Stage One for Tuesday.
Prices at the California Power Exchange rose to 210 mills/KWh Tuesday but softened a bit to 195 mills/KWh for Wednesday peak deliveries. Thursday's deliveries, however, jumped to 242 mills. Off-peak power climbed from 123 mills to 218 mills/KWh. The scant difference between day and night prices signaled the continued lack of hydroelectric generation imports and the extended maintenance outages for dozens of generating units throughout the Western interconnection.
Prices at Mid-Columbia and the California/Oregon Border topped the California cap price on Tuesday, reaching 260 mills/KWh at peak. Traders said that three-day deals for the holiday were slightly lower with Mid-C in the 190 mills to 235 mills/KWh range and COB holding between 200 mills and 220 mills/KWh. Off-peak was quoted between 175 mills and 200 mills/KWh.
With the return of the nuclear plant and a San Juan unit, Palo Verde peak prices dropped from 185 mills to about 130 mills/KWh. Off-peak was seen right at 100 mills/KWh. Trading was light, though, and several schedulers said they were avoiding making unnecessary purchases while holding back on excess in case Cal-ISO found itself short again over the weekend [Arthur O'Donnell].
Gas Bears Go into Hibernation as Bullish Prices Bellow
Somebody took the lid off Western natural gas prices this week and the market reached prices never before seen or even imagined. At one point during the short week, gas at the Southern California Border was quoted at $20/MMBtu-although the average was more on the order of $15 to $18/MMBtu.
"It's the same old story," one trader said. "There's not enough gas to meet demand. Prices will keep running up until something gives."
There's a fundamental lack of supply for all the generation demand and heating load," said another. The story may be becoming routine for some, but the extent of the price run-up was highly unusual. Even though national NYMEX benchmarks hit record levels in the $6.50 vicinity, that was nothing compared to the Topock price-or the similarly premium prices logged at other California hubs. The PG&E CityGate averaged $13.50/MMBtu on Tuesday and Malin topped $13/MMbtu.
Basin prices rose a dollar but were still in the $6.30 to $6.50/MMBtu range. The Alberta price topped $(C)8.10/Gigajoule Tuesday.
The loss of two nuclear units before the trading week even began put the market on edge, but what has buyers really nervous is the continued depletion of storage inventories. "They're pulling 1 Bcf out of storage everyday" in Southern California, said one trader. "It's gonna take a couple of years to dig out of this hole."
Others pointed to system balancing orders on both the SoCal Gas and PG &E pipelines this week as forcing a run on pipeline capacity.
Prices may cool a bit over the long weekend, as long as the region avoids severe weather. Still, balance of month contracts are above $15/MMbtu and the December prompt month price shows a nearly $6 premium over the NYMEX price-keeping costs above $12/MMBtu. One utility gas buyer advised market participants to "go long on firewood and flashlight batteries. There are no bears anywhere on the horizon" [A. O'D.].
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