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Freezing Temperatures Test Northwestern Supply

Freezing Temperatures Test Northwestern Supply

The severe winter cold snap last week triggered unprecedented price spikes at spot points in the Pacific Northwest and Northern California. PG&ampE Citygate prices hit $6.18/MMBtu on Monday and were near $5 on Tuesday. Prices jumped to $11.05/MMBtu at Sumas on the previous Friday for weekend flow, and on Monday and Tuesday stayed north of $6.

Peaking power demand and near peaking gas demand prompted short-lived emergency flow orders in Northern California with steep penalties for noncompliance, and forced Pacific Gas and Electric Co. to curtail some gas and power flowing on interruptible transportation (IT).

"We have somewhat of a coincident peak with the electric side going on," noted Mike O'Donnel, director of gas system operations at PG&ampE. "I've seen it in the past. When we get extremely cold, I think you see some electric space heating and they take off on you a bit. So we went into an [emergency flow order on Monday]." From the previous Friday to Monday, gas demand on PG&ampE's system rose 40% to 4.5 Bcf/d as space heating needs soared and power generators scrambled to find fuel.

"Our southern path, what we call our Baja Path (line 300), was running at capacity (1.2 Bcf/d). And our northern path, with Canadian gas coming in, was running at about 1.4 Bcf/d, with the upstream line limiting capacity to about 1.8 Bcf/d, so we had 400 MMcf/d of room there. We were also forecasting full utilization of storage. We were seeing demand higher than we had supply coming in."

The situation prompted PG&ampE to issue a zero tolerance emergency flow order Monday with steep $50/Dth penalties for noncompliance and another operational flow order Tuesday with a 5% tolerance and $25/Dth penalties for noncompliance. The utility urged customers to keep a close watch on their usage and on the well-below-normal temperatures. About 172 MMcf/d of gas flowing on interruptible transportation was cut on Monday and another 151 MMcf/d was curtailed the following day.

"We're seeing most of the western U.S. in an extremely cold weather situation that is very unseasonable. The mean temperature on our system usually is at about 46 degrees, and we're trying to supply a load that is at 34 degrees right now. That's extreme," he said on Tuesday. "We designed our system to meet 29 degrees and that is only meeting core load, so all of the industrial and large commercial load is off." Meanwhile, power load was soaring.

"Going into the day, we had an estimated demand on the electric side that exceeded supply and we were concerned about that." The California Independent System Operator declared a Stage Two Emergency Monday morning forcing PG&ampE to curtail 400 MW of power flowing on IT on its electric system. The ISO said operating reserves of power fell below 5% primarily because of a gas supply shortage, a conclusion confirmed by PG&ampE's Utility Electric Generation division.

O'Donnel said gas demand for power generation in PG&ampE's territory exceeded available supply by about 150 MMcf/d. "They bought all the gas they could find," said PG&ampE's Mike Katz, manager of the utility's power generation portfolio. "If we would have had more gas, we would have sold more electricity into the energy market.

"What we saw was that people who were out trying to purchase gas were not able to get gas into our system." Buyers throughout the entire Pacific Northwest were scrambling to find gas for space heating and power generation needs. Canadian producers may be rejoicing over new access to high-priced Chicago markets, but news that traditional Pacific Northwest and California markets are reaching new demand peaks should bring a little extra Christmas joy.

Rocco Canonica

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