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CAISO Moves to Ease Natural Gas Price Spikes for Power Generators

In response to a request from NRG Power Marketing, California's grid operator has taken steps to ease potential natural gas price spikes for generators this winter during another period of limitations on the Southern California Gas Co. (SoCalGas) pipeline and storage system.

The move comes at a time when some of state’s gas producers have been taking advantage of the occasionally severe differentials between the state's border and citygate pricing points. The state's major oil and gas producer, California Resources Corp., noted the phenomenon during its 3Q2018 earnings conference call last week.

The California Independent System Operator (CAISO) has asked the Federal Energy Regulatory Commission for authority to use a Monday-only gas price when it runs a day-ahead Sunday market in order to address generators' exposure to fuel price spikes.

In September, CAISO laid out a seven-part approach to maintain reliability this winter in the face of continued limited supplies from SoCalGas' Aliso Canyon underground gas storage field and nagging outages on parts of its transmission pipeline system. NRG has warned about intraday gas prices on Monday trading significantly higher than the weekend gas price.

The Intercontinental Exchange produces the Monday-only index at times when the gas market anticipates much higher demand than Saturday and Sunday.

As confirmed by CAISO and the California Energy Commission (CEC), the curtailment of noncore customers this winter season  is considered likely, as verified by a SoCalGas filing to the CEC.

"SoCalGas may need to curtail between 3.2 Bcf and 63.5 Bcf of forecast noncore demand throughout the winter season, given assumptions about weather and system outages," the CEC filing said.

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