Gas prices shot to $5/MMBtu last Monday at the SouthernCalifornia border and PG&E Citygate, and hourly intra-daypeaking 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 stategrid operator, California generating plants used every cubic footof natural gas they could squeeze through the state’s pipelinesystem to keep the air conditioners humming in response to astatewide heat wave.

The second stage alert, enacted less than two hours after aStage One had been called, required utilities to seek voluntarycurtailments. A combination of planned and unplanned maintenance onelectric generation units, low hydroelectric power availability andconstraints on parts of the natural gas interstate delivery systemfrom the Southwest caused gas demand and prices to skyrocket,according to sources among the electrical and gas utilities in thestate.

“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” forcausing Monday’s spot gas price spike. The OFO caused everyone toget behind on supplies over the weekend, he said, “and now we’rehaving to make up for lost time.” Another source, noting thatPG&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 levelforecast by the California Independent System Operator (Cal-ISO)before it instituted its Stage One and Two alerts in the earlyafternoon. Power demand peaked at 39,774 MW, far shy of the staterecord set last year (45,884MW) but that was mid-summer.Furthermore, this demand peak was more troublesome because of theextent of major generating units out of service.

The Cal-ISO issues the second stage alert when operatingreserves dip below the 5% level or are expected to within atwo-hour period. Prices are capped at $750/MW, and for severalhours Monday those caps were reached for ancillary services. (TheCal-ISO is restricted from accepting bids over the cap, so if therewas 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 daylike today,” said a Southern California Edison spokesperson Monday,noting that Edison peaked at 16,000 MW, still more than 2,000 MWbelow its all-time high set last year. “We’re not going to breakany records today. What makes it tight are the planned andunplanned outages of units. That’s what is keeping everyone ontheir toes.”

Pacific Gas and Electric, which like Edison and the state’sother major investor-owned electric utility, San Diego Gas andElectric, no longer operates gas-fired generation plants inCalifornia, indicated that its peak electric demand Monday was inthe 20-21,000 MW range, well below last year’s record of more than23,000 MW.

The Los Angeles Department of Water and Power (LADWP) wasrunning all of its gas-fired generation units all out, consumingupward of 300 MMcf/d. LADWP’s gas procurement manager reportedprices over the $4/Mcf level for gas supplies.

“It could get as high as $5 later on in a couple of months,” themanager indicated. “We’re not sure what the problem is. Some of itwe think has to do with El Paso Merchant holding all of thatcapacity (1.3 Bcf) and withholding some of it so there is aconstraint on the transmission system rather than just a problemwith availability of gas.

LADWP has had peak gas usage of up to 500 MMcf/d for a singleday, but its peak period average is in the 300 MMcf/d range. LastOctober, which was hot in southern California, the city utilityconsumed 9 Bcf, according to the procurement manager.

Southern California Gas was keeping specific throughput figuresconfidential. “Sendout is up as one would expect on a hot day liketoday, but we see no problem in meeting demand,” a SoCalGasspokesman said. PG&E’s San Francisco-based spokesperson saidMonday’s load for electric generation was 1.1 Bcf in an overallsendout of 2.7 Bcf.

Richard Nemec, Los Angeles

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