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Record Gas Demand, Power Alerts Hit California

Record Gas Demand, Power Alerts Hit California

California seemed as unprepared as ever last week to meet its energy needs in the face of a blast of cold weather. The power grid went through an intense struggle to meet heavy winter demand because a huge amount of generation was off-line due to either desperately needed maintenance or low water levels behind hydroelectric dams. But the big surprise was record gas demand for San Diego Gas & Electric (SDG&E), which was forced to curtail some interruptible customers.

The prices told much of the story last week. Spot gas prices rocketed to record heights as strong demand and restricted gas flows tested the system. On Wednesday, prices reached an average of $8/MMBtu and highs above $8.50 at the Southern California Border and PG&E Citygate. But that was just a warm-up for Friday when prices soared to more than $10.

Power prices bumped up against the bid cap at $249/MWh Wednesday and Thursday on the California Power Exchange and rose even higher on the spot market. Meanwhile, gas and electric utilities throughout the state and the state's electric grid operator issued a variety of emergency alerts throughout the week.

Combination utility SDG&E revealed Tuesday that it was forced to curtail gas service to many of its large electric generation and industrial customers on as temperatures dipped into the low to mid 40s. "We have very high demand out here," said SDG&E spokesman Ed Van Herik. "We've had a cold snap here. The temperatures are very unusual, and we've had a lot of growth in the region in the last few years. These are interruptible customers being curtailed in 12 blocks; some customers have been curtailed entirely and some have had only a portion of their loads curtailed." He said the customers subject to curtailment were chosen by a "random computerized process."

"Monday we set a new record for natural gas sendout of 613 MMcf/d," said Herik. "We expect our sendout [Wednesday] to exceed 600 MMcf. The last record was set Jan. 26, 1999 at 577 MMcf." Another SDG&E spokesman said although demand didn't return to record levels the rest of the week, it was very high in the morning hours.

Thirty-degree temperatures increased demand significantly in Northern California, too. System demand soared to 3.76 Bcf/d on Tuesday, a 500 MMcf/d increase from the previous Friday. As a result, PG&E was forced to use more than 1 Bcf/d of storage withdrawals, and call a customer specific operational flow order the following day. System inventory also dropped below the normal operating range on Thursday, but no OFO was called.

Southern California Gas also experienced strong demand, but fell short of record levels, according to a spokeswoman. "We hit 4.5 Bcf/d on Tuesday and our all-time high was 5.3 Bcf/d back in 1990." Nevertheless, SoCalGas has relied heavily on storage withdrawals to meet demand.

To complicate matters, upstream gas pipelines have been conducting maintenance programs that reduced gas flows significantly last week. Transwestern Pipeline was conducting maintenance on compressors in the San Juan Basin, reducing gas flows by as much as 400 MMcf/d at times. Ongoing maintenance on its mainline West of Thoreau segment already was reducing flows by about 60 MMcf/d to California.

Maintenance on El Paso Natural Gas' north mainline reduced gas flows to California by about 250 MMcf/d, and the south mainline has been limited by about 200 MMcf/d because of the rupture that occurred on the pipeline in August. The pipeline also had an unauthorized overpull penalty in effect all week until Wednesday.

The cold weather and pipeline issues, however, still were only part of the problem. Any gas-fired peaking power available in the state was running full tilt to compensate for 12,000 MW of generation being down because of maintenance or forced outages. "Natural gas usage right now for power generation is twice as much as on a typical winter day," SDG&E's Herik said on Tuesday.

On Friday morning it appeared likely that the California Independent System Operator would call an electrical emergency alert for the fifth day in a row because of the generation outages, limited power imports and high in-state demand. The ISO issued stage one and stage two alerts Monday, Tuesday and Wednesday and had a stage one alert on Thursday. It requested supplemental power bids for 2,000 and 3,000 MW at several points during the week. (Stage two alerts are called when power reserves fall below 5%. At that point certain interruptible customers have their power curtailed.)

"Yes it does sound like a lot [of generation is down] until you break it down," said CAL-ISO spokesman Patrick Dorinson in an interview on Wednesday. "About 7,000 MW of that [12,000 MW] is planned and scheduled outages for maintenance, repair, whatever; these units worked very hard this summer. Out of that 7,000 MW, about 1,000 MW is delayed in returning to service for whatever reason. That brings you down to 6,000 MW and that's very manageable given the fact that we're in a lower load period."

Out of the remaining 5,000 MW that was not scheduled to be out of service, roughly 2,000 MW is hydroelectric power that is down because there is no water behind the dams, he said. The other 3,000 MW is down for "all kinds of problems. These units are old. This is not exactly the Cadillac of fleets.

"During the summer when we were running 45,000 MW days on average, we were out probably 2,500 MW a day in forced outages. Add to that the fact that our normal imports from the Pacific Northwest, which used to be roughly around 7,000 MW this time of year, are down to 4,000 to 4,500 MW because they need it; their dams don't have any water behind them either. You add all that together and you have a problem."

Potentially adding to the problem going forward, Dorinson said, is the state of generator emissions credits. Because so many power plants were running full tilt all summer, many generators are very low on emissions credits. Some may have to shut down their plants as a result. "I'm sure everybody is talking to the Air Quality board, as we are, to try and get some credits extended," he said.

Although there were no major failures during the week, the situation seemed to worsen on Friday at least in the gas market. Traders were reporting spot gas deals at more than $12/MMBtu. "This has been the coldest November in Southern California I've ever seen," said one marketer on Friday, "our power loads are very strong."

Rocco Canonica

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