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Western Price Survey

Week's End Edition
December 11, 2009
Power, Natural Gas Prices Show Volatility With Winter Weather

Western electricity prices retreated from the triple digits to more seasonal levels by Friday after jumping as much as $30/MWh on a frigid Arctic storm that brought ice, snow and high winds to the region and pumped up natural gas prices.

As the Northwest dealt with record cold temperatures, average Mid-Columbia prime trades shot up to a weekly high of $108.81/MWh on Tuesday, but settled Friday at $57.09, down $6 from the start of the week. Prices for nighttime power fell $5 to $48.83/MWh for the week, but had traded as high as $76.33 on Tuesday.

A similar trend was seen at the California-Oregon Border, where peak electricity hit a high of $116.90/MWh on Tuesday. For the week, however, average prices slumped $12 to an average of $59.27, while off-peak trades dipped $5 to average $49.15/MWh.

In California, prices were not immune to the jump in natural gas prices and the winter weather, which included a reported 30 inches of snow in El Dorado County. Peak prices hit a high during the week of $89/MWh at North of Path 15 and $77 at South of Path 15. As the storm exited and natural gas prices calmed a bit, average prices for daytime power slipped and settled Friday at $54.99/MWh at NP15 and $53.43 at SP15. Spreads for nighttime power were relatively tame by comparison (see chart).

Peak power demand dipped from 33,500 MW on Monday to 32,600 MW on Thursday, according to the California Independent System Operator. Peak usage was likely to fall to 31,300 MW on Friday.

Wintry weather across the country led to the heating season's first drawdown since it began on Nov. 1. Natural gas storage fell 64 Bcf to 3.773 Tcf, but inventories are still 14 percent higher than in the same period last year and nearly 16 percent above the five-year average, according to the U.S. Energy Information Administration.

All three areas of the country reported storage withdrawals last week. Western stockpiles weren't immune to the drawdown, decreasing 9 Bcf to 517 Bcf. They now stand 11 percent above last year and almost 19 percent above the five-year average.

The surprise drawdown in inventories propelled natural gas prices to an 11-month high on Thursday of $5.29/MMBtu. It was the highest Henry Hub spot price since Jan. 14. On Friday, prices fell back by 15 cents/MMBtu on Nymex.

In the West, spot prices also staged a minor increase for the week, settling from 22 cents to 31 cents higher, and ending above $5/MMBtu at every key hub (see chart).

Wintry weather and capacity limitations on Western natural gas pipelines also contributed to the run-up in prices, according to the EIA, citing Bentek Energy. Restrictions on the Northwest Pipeline of 38 Mcf per day led prices to rise 85 cents to $6.04/MMBtu on the week at the Sumas hub in Washington state. Compression problems and extreme cold in its service area were the reason behind the limitations.

Looking Ahead: A moribund economy, flaccid demand for natural gas, and a supply glut have conspired to keep prices uncharacteristically low this year. Henry Hub spot natural gas prices are expected to close out the year at an average of $3.95/Mcf, according to the EIA's Short-Term Energy Outlook, released Tuesday. Prices, however, are projected to rise slightly next year to an average of $4.62/Mcf. Continued high levels of drilling and uncertainty about an economic recovery may continue to crimp prices and keep them low.

According to the EIA, total consumption of natural gas is likely to fall by about 2 percent this year and by 0.4 percent next year [Kristina Shevory].

Western Electricity Prices
Week's End: Dec. 7 - 11, 2009
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 27.28-651.11 19.01-294.94
Mid-Columbia 55-130.75 47.50-80
COB 58-132 48-78.50
NP 15* 53-89 39-50.50
SP 15* 51-77 36.75-46
Palo Verde 46-63.50 33.50-47

* 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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Contact Chris Raphael, editor with questions regarding Price Survey Content.

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