CA Heat, Nuke Outages Spark Heavy Demand
Gas prices shot to $5/MMBtu last Monday at the Southern
California border and PG&E Citygate, and hourly intra-day
peaking prices on the California Power Exchange spiked to $863/MWh.
Day-ahead peaking power prices got as high as $470.
In the midst of a Stage Two emergency power alert by the state
grid operator, California generating plants used every cubic foot
of natural gas they could squeeze through the state's pipeline
system to keep the air conditioners humming in response to a
statewide heat wave.
The second stage alert, enacted less than two hours after a
Stage One had been called, required utilities to seek voluntary
curtailments. A combination of planned and unplanned maintenance on
electric generation units, low hydroelectric power availability and
constraints on parts of the natural gas interstate delivery system
from the Southwest caused gas demand and prices to skyrocket,
according to sources among the electrical and gas utilities in the
"I've got a lot of power plants to feed, and it's really hot!"
said one gas marketer. He blamed a "stupid SoCal Gas OFO" for
causing Monday's spot gas price spike. The OFO caused everyone to
get behind on supplies over the weekend, he said, "and now we're
having to make up for lost time." Another source, noting that
PG&E had a customer-specific OFO in effect Sunday, commented,
"I can guarantee you that [high-inventory situation] is gone now.
We might even head to a low-inventory OFO by Thursday."
Electrical demand did not quite reach the 40,500 MW level
forecast by the California Independent System Operator (Cal-ISO)
before it instituted its Stage One and Two alerts in the early
afternoon. Power demand peaked at 39,774 MW, far shy of the state
record set last year (45,884MW) but that was mid-summer.
Furthermore, this demand peak was more troublesome because of the
extent of major generating units out of service.
The Cal-ISO issues the second stage alert when operating
reserves dip below the 5% level or are expected to within a
two-hour period. Prices are capped at $750/MW, and for several
hours Monday those caps were reached for ancillary services. (The
Cal-ISO is restricted from accepting bids over the cap, so if there
was a buyer of $863/MWh power it would have to be outside the ISO,
a Cal-PX spokesperson said.)
"Things are tighter than they normally would be on a hot day
like today," said a Southern California Edison spokesperson Monday,
noting that Edison peaked at 16,000 MW, still more than 2,000 MW
below its all-time high set last year. "We're not going to break
any records today. What makes it tight are the planned and
unplanned outages of units. That's what is keeping everyone on
Pacific Gas and Electric, which like Edison and the state's
other major investor-owned electric utility, San Diego Gas and
Electric, no longer operates gas-fired generation plants in
California, indicated that its peak electric demand Monday was in
the 20-21,000 MW range, well below last year's record of more than
The Los Angeles Department of Water and Power (LADWP) was
running all of its gas-fired generation units all out, consuming
upward of 300 MMcf/d. LADWP's gas procurement manager reported
prices over the $4/Mcf level for gas supplies.
"It could get as high as $5 later on in a couple of months," the
manager indicated. "We're not sure what the problem is. Some of it
we think has to do with El Paso Merchant holding all of that
capacity (1.3 Bcf) and withholding some of it so there is a
constraint on the transmission system rather than just a problem
with availability of gas.
LADWP has had peak gas usage of up to 500 MMcf/d for a single
day, but its peak period average is in the 300 MMcf/d range. Last
October, which was hot in southern California, the city utility
consumed 9 Bcf, according to the procurement manager.
Southern California Gas was keeping specific throughput figures
confidential. "Sendout is up as one would expect on a hot day like
today, but we see no problem in meeting demand," a SoCalGas
spokesman said. PG&E's San Francisco-based spokesperson said
Monday's load for electric generation was 1.1 Bcf in an overall
sendout of 2.7 Bcf.
Richard Nemec, Los Angeles