Western Price Survey / Archives
December 22, 2000
The continuing power crisis in California notched up another level as at least one major utility all but threatened to cut customer power deliveries because of financial uncertainty. As Pacific Gas & Electric and Southern California Edison pressured regulators for full recovery of power costs incurred since summer, Edison's chief executive officer John Bryson warned in a Los Angeles Times opinion piece December 21 that regulatory action to secure utility viability by allowing an immediate rate hike of as much as 30 percent, "is the only way to avoid the risk of rotating blackouts on our electric system." Inaction, he said, is "a decision to let the utilities fail and raises the likelihood of power rationing." Even PG&E officials joined in the dire predictions, as the California Public Utilities Commission deferred acting on the utilities' latest "rate stabilization" plans forwarded to the commission Thursday.
Meanwhile, the California Independent System Operator relied on federal powers conferred last week by Energy Secretary Bill Richardson to keep power flowing. Twice during the week, Cal-ISO used the emergency order to demand that generators supply capacity to the hard- pressed system, or explain why not. The state was in a sort of perpetual Stage Two, triggered early in the week by loss of the 500 KV Midway/Sunset transmission line along the critical Path 15. Because imports from the Northwest have "slowed to a trickle," Cal- ISO said, Northern California has had to pull power from the south, but the Path 15 bottleneck has severely limited transfer capacity.
With a deepening cold front and snow storms passing through Montana and Idaho, prices in the Pacific Northwest again jumped to as much as 5,000 mills/KWh--at least temporarily on Tuesday. Though the spot market was very thinly traded and prices fell precipitously Wednesday, the California Power Exchange had a knee-jerk reaction by climbing to nearly 950 mills/KWh for Wednesday peak deliveries. Oddly, the off- peak price was even higher at 1,080 mills/KWh.
This seemingly astronomical price marks were mediated somewhat by congestion adjustments, and the settlement price will be more in the 250 mills to 492 mills/KWh range, depending on location. CalPX decided to change the way it computes adjustment bids, losing the hard 250 mills cap on congestion pricing for a floating band of 125 mills above or below the unconstrained market clearing prices. While promising to stem the tide of load migration to real-time markets, the move added another level of uncertainty to market pricing structures.
By the end of the week, traders were wrapping up trades for Christmas Day and the close of the month. Cal-PX settled to 295 mills/KWh at peak for Friday and 277 mills/KWh for overnights. Weekend transactions at Mid-Columbia and COB were about 375 mills/KWh. At Palo Verde, 225 mills was the middle ground price for peak power and off-peak was between 200 mills and 230 mills/KWh.
Although the Diablo Canyon nuclear unit No. 1 overcame its slight derating midweek, operators at San Onofre were allowing No. 3 to coast down to its scheduled refueling outage next week that will last through most of January.
Normally at this time of year, traders and schedulers might be enjoying a restful Christmas holiday-instead, they will be watching nervously to see if the utility economic crisis fulfills the worst fears of Y2K that were avoided a year ago [Arthur O'Donnell].
Gas Prices Stabilize at High Levels
Though SoCal Border delivered prices again rose above $20/MMBtu, there was not the extreme spike exhibited during last week's panic attack. But no one is predicting much of a decrease into next year either. "January is still looking at strong winter demand," said one trader. "Generation load shows no signs of letting up."
National NYMEX prices were again in record territory, but some traders suggested that the pinnacle rested on very thin trading and could collapse rapidly.
San Juan Basin prices edged up through the week, from $8.50 to over $10/MMBtu. Permian Basin supplies were pulled in two directions as the Midwest got its first true blast of winter, with costs going above $11/MMBtu Thursday.
Northern California was on the tail end of a Northwestern cold front and both Malin and CityGate prices shadowed the Topock price at about $15.50 to $16/MMBtu Thursday. In Alberta, the daily spot price rose steadily from $(c)11.50/Gigajoule Monday to over $13.60/Gj, ending the week at $31.13/Gj [A. O'D.].
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