Western Price Survey / Archives
December 15, 2000
At their peak, Western power prices reached heights never before seen or even imagined as a wave of panic buying beset both electric and gas markets.
Anticipation of a severe cold weather blast sent reported prices in the Pacific Northwest to 5,000 mills/KWh on Monday and California Power Exchange daytime clearing prices to a record 1,407 mills/KWh midweek.
But how much was traded at the bilateral prices is uncertain, and when transmission congestion was taken into account, the CalPX price depreciated significantly. Sellers into California may see payments between 250 mills and 500 mills/KWh for their energy deliveries even at the high point of the week. No one will know for certain until settlement time-about two months from now.
Still, it was a wild week for power schedulers and the California Independent System Operator barely scraped through another harrowing week. In the midst of an 11-day run of serious system emergencies, Cal-ISO needed intervention from the US Department of Energy and federal power marketers to meet loads. DOE used its bully pulpit and invoked emergency powers to scare additional resources into California and stop exports, while Bonneville Power Administration manipulated its hydro system to pull about 1,740 MW out of a hat to send south.
All this occurred as the Northwest itself teetered on the edge of darkness. The anticipated Arctic Blast of sub-zero temperatures turned out not to be as bad as feared, but things were bad enough to sent the system into alert early in the week.
No one quite knew what to make of the market. After federal regulators allowed Cal-ISO to ease the lid on ancillary services bids, the Power Exchange took off like a rocket. Daytime prices moved from the 250 mills perceived cap last week to 654 mills Monday, 988 mills Tuesday and the astronomical 1,407 mills/KWh Wednesday. After that, things dropped to 589 mills for Thursday, then 498 mills/KWh for Friday deliveries. Off-peak power roams widely between 482 mills and 684 mills/KWh-also record levels.
However, because the FERC order did not change the adjustment bid cap, zonal prices for the PX and the posted results of imbalance energy sales at Cal-ISO mostly hung at 250 mills, although Northern congestion prices moved up to 492 mills/KWh at NP15 and NW1 for Friday.
The exchange was put out by the fact that price disparities caused load to flee forward markets and land in the real-time market- something everyone has been trying to minimize. But Cal-ISO's top priority was to keep power from flowing out of state, which it said the lifting of the cap was able to accomplish. The political fallout from declaring a halt to exports and perhaps erroneously identifying out-of-state marketers as "withholding" sales to the state may be something that Californians have to live through for a long time, however. Some marketers and generators admitted ceasing sales into the state because of concerns that California utilities might go bankrupt, but a heavy-handed attempt by Governor Davis' office to name names just left Cal-ISO with egg on its face when most of the " Dirty 13" refuted the allegations. Even some marketers not identified were worried. "We just hope we get paid," said one.
Once it appeared the Northwest would not turn into a block of ice, prices fell precipitously at Mid-Columbia and COB. By Thursday, trading into the weekend looked to be in the 400 mills to 500 mills/KWh range. No one reported off-peak sales of any kind in the north as utilities tried to make do without resorting to paying whatever the market demanded.
Southwestern prices never got too crazy, but gravitated to the 330 mills to 350 mills/KWh range at Palo Verde and Four Corners. Off-peak was about 230 mills to 250 mills-or whatever the zonal price into California was that day.
The good news, if there was any, was that the region's full complement of nuclear power was back to work-except for a 10 percent drop in output at a Diablo Canyon unit on Friday morning-and generators that had been out for maintenance were reported to be drifting back into service [Arthur O'Donnell].
Where No Gas Price Has Gone Before
While some gas industry analysts were preparing what they considered dire forecasts of prices above $20/MMBtu, the market moved about three times higher early in the week. Prices at the Southern California Border jumped to $69/MMBtu or more and even Northern California CityGate prices topped $61/MMBtu. Once the panic passed, though, deflation set in rapidly and prices moved quickly lower-dropping about $20 per day. By Thursday, SoCal Border was $15.50 and key northern hubs were around $10/MMBtu. "Now that the panic has diminished, prices are close to national benchmarks," one scheduler declared. "But prices are still pretty high" [A. O'D.].
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