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Western Price Survey

December 2, 2005
Winter Weather Storms the West

As has become the norm, the price of natural gas continues to drive the cost of wholesale power throughout the country. Winter weather did manage to get into the act during the latter half of this week, however. Snowstorms in the Northwest and throughout the Great Lakes region on Thursday helped to push up the cost of electricity in Friday's trading session. Substantial rainstorms throughout California that day also drove the mercury down and the thermostat up. Some Pacific Gas & Electric customers experienced power outages due to the driving storms on Thursday, but most had power restored by the following morning.

Northern California peak power moved for between 99 mills and 103 mills/KWh on Monday, edging up as high as 105.25 mills/KWh at midweek. Packages traded Friday for next-week delivery went for as much as 111 mills/KWh. Off-peak power values stayed between 80 mills and 90 mills/KWh early in the week, but swelled up to 95.50 mills/KWh on Friday.

South of Path 15 peak power attracted the week's high of 112 mills/KWh on Friday after spending much of the week in the range of 93 mills to 108 mills/KWh. Off-peak power in Southern California drew between 77 mills and 87.50 mills/KWh in the first four days of the week. On Friday, low-demand power was changing hands for between 89.25 mills and 95.75 mills/KWh, more than the on-peak price in the Southwest.

Palo Verde daytime deliveries cost between 80 mills and 90 mills/KWh this week. Higher-than-normal temperatures in the region account for the relative stasis in the cost of PV power compared to that bought and sold at other Western hubs.

Peak-time electricity for delivery to the Mid-Columbia hub traded on the spot market for between 86 mills and 99.75 mills/KWh during the first half of the week. Following Thursday's snowstorm in the Northwest, power prices were inspired to move up by another 5 mills or so in Friday's session. Mid-C peak power closed the week at a high of 105.50 mills/KWh. Off-peak power attracted between 81.50 mills and 85 mills/KWh much of the week, but soared up to 95.50 mills/KWh on Friday.

California-Oregon border power moved for as much as 109 mills/KWh on Friday after spending most of the week in the vicinity of 100 mills/KWh. Nighttime power at COB traded for between 82 mills and 93 mills/KWh this week.

Few power plants of note were off line this week. Palo Verde No. 1 continues to be out of service on a refueling outage. Diablo Canyon No. 1, however, is making its way back to full power after its own refueling shutdown. The 1,113 MW unit should be ramped up to full output sometime early next week.

On December 1 the footprint of the California In-dependent System Operator control area shrank and that of the Sacramento Municipal Utility District expanded. One day earlier, the Federal Energy Regulatory Commission accepted changes to the operating agreement between the muni and Cal-ISO that govern coordination between the two control areas.

FERC approved the California-Oregon Intertie Control Area Operating agreement between the two entities in order to facilitate the smooth operation of the 500 KV transmission line (COTP) that transfers power between the Pacific Northwest to Central California. The COTP was incorporated into SMUD's system at the request of the Transmission Agency of Northern California.

The departure of the Modesto Irrigation District and the Turlock Irrigation District from Cal-ISO also became effective at the beginning of this month. MID became part of the SMUD control area and TID became its own control area.

Cal-ISO has seen a few departures and shifts in its control area in the past year. The Western Area Power Administration's Sierra-Nevada region system elected to join SMUD rather than Cal-ISO when its operating agreement with Pacific Gas & Electric was terminated at the end of 2004. Prior to that, SMUD itself left the Cal-ISO fold.

At its business meeting the evening of December 1, SMUD Assistant Director Jim Shetler told the muni's board of directors that the transfer of the COTP and MID to SMUD from Cal-ISO went smoothly and is "one more step to being independent."

In comments filed in the FERC proceeding October 20, the California Public Utilities Commission ex-pressed concern that the departure of MID and loss of Cal-ISO control of the COTP would "further balkanize the operation of the transmission grid in California." The CPUC asked FERC to "seriously question whether this proposal will serve to enhance--or to detract from--the reliability of the transmission grid in California, and whether it is in the overall interest of California's ratepayers."

Cal-ISO responded to the state commission's concerns in a November 7 filing with FERC. The system operator said that while it agreed with the CPUC's concerns that transfer of the COTP to SMUD "could adversely affect the reliability of the transmission grid in California," it was not able to persuade the COTP participants to stay with Cal-ISO.

FERC was not swayed by the CPUC's arguments, noting that both Cal-ISO and SMUD were required to adhere to Western Electricity Coordinating Council and North American Electricity Reliability Council reliability guidelines [Shauna O'Donnell].

Above-Average Storage Numbers Influence Gas Prices Little

The first significant withdrawal of natural gas from underground storage facilities in the Lower 48 was reported by the Energy Information Administration this week. According to the Weekly Natural Gas Storage Report, 49 Bcf of fuel was taken out of storage during the week ending November 25. Overall quantities of gas in storage remain 6.3 percent above the five-year average, a notable--if not comfortable--margin. Of the 3,225 Bcf of gas stored as of last Friday, 439 Bcf is in the West. This amounts to 15.5 percent more stored gas than the five-year average of 380 Bcf.

Despite the production and processing woes in the Gulf Coast region, these storage figures would seem to indicate that adequate supplies of gas are available for the winter heating season and should exert at least some downward pressure on the price of gas traded on the spot market. In Friday trading, after the EIA figures were made available, however, the price of gas took a bump upward.

Permian producing basin gas closed the week at a high of $10.74/MMBtu after opening on Monday for between $9 and $9.50/MMBtu. San Juan Basin gas prices also increased steadily during the week. After moving for between $8.90 and $9.85/MMBtu during the first half of the week, gas at the basin attracted prices above $10/MMBtu on Thursday and Friday.

Deliveries of gas to the Southern California hub at Topock were valued at between $9 and $10/MMBtu early in the week, but gained another dollar in late-week trading. Malin prices hovered in the high $9 range during the Monday to Wednesday trading sessions. By Friday, deliveries at the Northern California access point were attracting $11.25/MMBtu [S. O'D.].

Western Electricity Prices
Nov. 28 - Dec. 2, 2005
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 67.13-720.37 10.93-244.23
Mid-Columbia 86-105.50 75.25-95.50
COB 92.25-109 82-93
NP 15 98-111 79.75-95.50
SP 15 93-112 77-95.75
Palo Verde 80-91 70-87.78

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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Contact Shauna O'Donnell, editor with questions regarding Price Survey Content.

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