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Western Price Survey

Week's End Edition
December 18, 2009
Prices Get Jitters Before Christmas

'Twas the week before Christmas, and all through the West ... power prices stayed relatively calm.

Electricity prices posted modest gains on slightly cooler weather, moderate increases in natural gas prices, and the usual anticipation of higher demand for Monday power. Still, the gains were minimal compared to last week's dramatic triple-digit prices.

Over the week, California daytime power gained $3 across the state to $58.93/MWh at North of Path 15 and $57.84 at South of Path 15. Nighttime trades rose $8 in the north to $47.22/MWh, and $6 in the south to $44.33.

Average Palo Verde peak prices traded sideways, settling at $48.93/MWh, while off-peak values increased $3 to $38.57.

Power demand was mild this week in the Golden State. Top usage crept up from 32,000 MW on Monday and hit the week's high of 32,200 MW on Tuesday before falling to 31,800 MW on Thursday, according to the California Independent System Operator.

However, a ridge of high pressure building over California, combined with an onshore flow of air, will keep temperatures cool. By Tuesday, the weather will have cooled at least 10° F, falling into the low 50s in San Francisco, the high 60s in Los Angeles, and the low 60s in Phoenix.

Rain will douse the Northwest through early next week, and temperatures will dip into the low 40s in Portland and Seattle, according to the National Weather Service.

At the California-Oregon border, peak prices notched a $2 increase to average $57.49/MWh. Off-peak trades picked up $8 to settle at an average of $50.50.

Mid-Columbia prime trades tacked on $5 to average $55.20/MWh, while off-prime values added over $8 to $48.39.

Extremely cold weather prompted the second-biggest withdrawal for natural gas in December, the U.S. Energy Information Administration reported. The weather was 20 percent colder than average last week, the National Weather Service said, prompting Americans to crank up their furnaces to stay warm. Natural gas stockpiles dropped by 207 Bcf.

At 3.566 Tcf, however, supplies exceed last year by 12 percent and the five-year average by nearly 14 percent.

In the West, working natural gas in storage declined by 39 Bcf to 478 Bcf, and storage is now almost 5 percent above last year and 13.5 percent above the five-year average.

Frigid weather in the Northeast plumped up prices and sent them to their highest in almost a year. On Friday, natural gas for January delivery closed at $5.78/MMBtu, up 45 cents over Monday. Prices have doubled since September, when they hit their lowest point in more than seven years, but still remain lower than last year.

Out West, spot natural gas prices were up 20 cents/MMBtu or less for the week. Prices ranged from $5.59/MMBtu at the Permian and San Juan basins to $6.18/MMBtu at PG&E CityGate.

What's ahead: Despite the drop-off in demand and attendant lower natural gas prices, drilling in shale formations will continue to drive a production boom across the country. Last year, domestic natural gas production clocked in at 20.6 Tcf and is expected to hit 23.3 Tcf in 2035, according to the EIA's early release of the Annual Energy Outlook.

With so much natural gas coming on line, Henry Hub prices are projected to dip from $8.86/MMBtu and bob between $6 and $7/MMBtu through 2025. But consumption is expected to ramp up 14 percent from last year through 2035.

With a large supply glut and a moribund economy, many analysts have assumed that natural gas prices won't recover for years. But Exxon Mobil, the world's largest publicly traded oil and gas company and a conservative investor, believes differently. On Monday, the oil giant surprised Wall Street and snapped up natural gas driller XTO Energy for $31 billion. While Exxon didn't provide any price forecasts, it's likely the company sees natural gas playing a bigger role as the government moves to regulate carbon emissions [Kristina Shevory].

Note: The Western Price Survey will not be produced during the week of December 21st due to Energy NewsData's regular holiday closure. The next Western Price Survey update will be Wednesday, December 30.

Western Electricity Prices
Week's End: December 14 - 18, 2009
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 18.68-105.53 13.88-54.88
Mid-Columbia 47-57.25 38.25-52
COB 48.75-59 40.25-51
NP 15* 53-59.25 38.75-47.45
SP 15* 51-58.25 37.50-44.75
Palo Verde 46-50 31-40

* 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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