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Western Price Survey

Week's End Edition
December 23, 2010
Long-Term Natural Gas Use Up, Prices Down

The U.S. Energy Information Administration expects that lower natural gas prices and increased production (especially from shale) will boost the use of natural gas for electricity generation to 25 percent by 2035, up from 23 percent today. But a report from the consulting firm Black & Veatch expects natural gas to account for 40 percent of domestic electricity generation by then. That study factors in reduced reliance on coal-powered generation.

Both the EIA and Black & Veatch note the increased importance of renewable energy, including hydro. The EIA says renewables will contribute 14 percent to domestic electricity generation by 2035, while Black & Veatch estimates that figure to be 17 percent.

The EIA expects average delivered electricity prices to fall slightly by 2035. The current price is 9.8 cents/kWh and should drop 8.9 cents/kWh by 2016, but move up slightly to 9.2 cents/kWh by 2035.

Natural gas spot prices in the West fell slightly over the truncated trading week. For the Monday-to-Thursday trading period from Dec. 20 to Dec. 23, the average price for Southern California Border gas lost about 12 cents to reach $3.98/MMBtu. Meanwhile, PG&E CityGate gas dropped 9 cents to $4.15/MMBtu, and Malin gas lost 14 cents to end at $3.93.

Natural gas futures prices are being shaped by hedge funds and speculators, reports Enerfax Daily. Futures contracts traded for $4.08/MMBtu Thursday, according to Bloomberg. Futures prices saw the greatest weekly decline since August despite colder weather and decreased stores, according to Enerfax, and prices may drop further based on more temperate weather and expected increased gas transportation from the Rockies to hubs in California and Illinois. Prices are already down 26 percent this year.

Daytime power prices for Western hubs dropped across the board between Monday and Thursday, with Northwestern hubs experiencing the greatest losses from Dec. 20 to Dec. 23.

Both Mid-Columbia and the California-Oregon Border lost about $2 over the trading period, with Mid-C finishing at an average of $31.09/MWh and COB around $33.

Meanwhile, North of Path 15 and South of Path 15 daytime power finished around $35/MWh, down about $1.30/MWh. Palo Verde lost less than a dollar and traded for an average of $32.54/MWh on Thursday, Dec. 23.

Average prices for nighttime power by Thursday ranged from about $24.50/MWh to $30.10/MWh (see chart), relatively flat over the trading period.

What's ahead: Meteorologists say they have little confidence in creating long-term forecasts for much of the West Coast based on the unpredictable timing of new systems entering the region. Seattle expects temperatures in the high 40s Monday through Wednesday, with possible cooler, rainy weather and snow in the mountains. Temperatures in Portland should be in the low 40s through Wednesday, with a possibility of heavy rains midweek. San Francisco should be drier by Monday, but could see showers by Wednesday. Southern California has a chance of rain Tuesday, as a cold front may enter the region [Linda Dailey Paulson].

Editor's Note: Due to the Christmas and New Year's holidays, this will be the only editon of the Western Price Survey this week, and none will be published the week of December 27th. Regular editions will resume the first week of January, 2011.

Western Electricity Prices
Week's End: December 20 - 23, 2010
Hub Peak (heavy) Off-peak (light)
Alberta Pool (C$) 24.26-289.15 20.86-104.28
Mid-Columbia 28-34.25 26-32
COB 30-35.50 27.25-31
NP 15* 31.25-37 24.25-25.75
SP 15* 31-37.25 23.50-27
Palo Verde 29.50-37.50 21.75-26

* 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.


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

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