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West Pricing Strongest; Power Alert Effects Minimal

West Pricing Strongest; Power Alert Effects Minimal

Monday's spot trading yielded a hodgepodge of results, with hot weather in both the East and West being the primary market force. Despite an appeal for electricity conservation in New England as regional power utilities strained to meet demand, gas prices there showed little change. But a western heat wave had quotes ranging from flat to more than a nickel higher.

Not counting firmness in the Southwest and Rockies, the other major producing areas (Gulf Coast, Applachia and Midcontinent) generally were flat to off a few cents. The mild softness came even with parts of the Southeast beginning to experience more normal summer high temperatures in the 90s.

A Power Watch declared by ISO (Independent System Operator) New England, effective at 11 a.m. EDT Monday and extended through today, had relatively little impact on the Northeast gas market. The New England power pool apparently was able to cope effectively with high electric demand resulting from hot and humid weather, as swing quotes for Transco Zone 6-NYC and Texas Eastern M-3 were about flat. But as one source pointed out, Friday's citygate jumps of about a nickel or so obviously had already factored in most of the upcoming explosion of power generation load.

A power marketer said the alert was kind of a non-event for him; peak-hour quotes of $60/Mwh in the New England power pool were relatively mild, he added. The primary effects on gas from the ISO's alert came in a large aggregator's Algonquin citygate quotes averaging in the high $2.50s, about a nickel above M-3 and Zone 6-NYC levels. And a utility buyer in the region said an intraday Zone 6-NYC purchase at $2.58 was 4-5 cents above swing deals for today's flow.

The day's biggest increase of about 7 cents came at the PG&E citygate, where the dual utility switched abruptly from a high-inventory weekend OFO to projecting Monday's linepack would be 150 MMcf below its target. However, no new OFO was issued.

Western heat, especially in the California and east-of-California markets, translated into generally higher gas prices. The demand pull was enhanced by several traders showing up short-handed in the Southwest supply basins, said a marketer who was hearing peak-hour electric prices as high as $80/Mwh at the Palo Verde Switchyard. Another source reported similar peaking numbers on the California Power Exchange, saying non-coastal temperatures were approaching 100 degrees. "That [$80/Mwh] is the highest price for power we have seen so far in this 'so-called summer,'" he said. California temperatures will remain high for the next couple of days, he added, but then will go into a 10-degree cooling trend heading into a holiday weekend.

July pricing was a little bit higher Monday, "maybe a penny to a penny and a half," than on Friday, said a Northeast marketer. A buyer reported getting Transco Zone 6-NYC offers at $2.48-50. New fixed-price deals were reported at $2.24-25 for Sonat and Florida Gas-Zone 2, $2.26-28 for Henry Hub, $2.04 for El Paso-San Juan (Blanco pool) and $2.36-38 for the Southern California border.

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