California seemed as unprepared as ever last week to meet itsenergy needs in the face of a blast of cold weather. The power gridwent through an intense struggle to meet heavy winter demandbecause a huge amount of generation was off-line due to eitherdesperately needed maintenance or low water levels behindhydroelectric dams. But the big surprise was record gas demand forSan Diego Gas & Electric (SDG&E), which was forced tocurtail some interruptible customers.

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

Power prices bumped up against the bid cap at $249/MWh Wednesdayand Thursday on the California Power Exchange and rose even higheron the spot market. Meanwhile, gas and electric utilitiesthroughout the state and the state’s electric grid operator issueda variety of emergency alerts throughout the week.

Combination utility SDG&E revealed Tuesday that it wasforced to curtail gas service to many of its large electricgeneration and industrial customers on as temperatures dipped intothe low to mid 40s. “We have very high demand out here,” saidSDG&E spokesman Ed Van Herik. “We’ve had a cold snap here. Thetemperatures are very unusual, and we’ve had a lot of growth in theregion in the last few years. These are interruptible customersbeing curtailed in 12 blocks; some customers have been curtailedentirely and some have had only a portion of their loadscurtailed.” He said the customers subject to curtailment werechosen by a “random computerized process.”

“Monday we set a new record for natural gas sendout of 613MMcf/d,” said Herik. “We expect our sendout [Wednesday] to exceed600 MMcf. The last record was set Jan. 26, 1999 at 577 MMcf.”Another SDG&E spokesman said although demand didn’t return torecord levels the rest of the week, it was very high in the morninghours.

Thirty-degree temperatures increased demand significantly inNorthern California, too. System demand soared to 3.76 Bcf/d onTuesday, a 500 MMcf/d increase from the previous Friday. As aresult, PG&E was forced to use more than 1 Bcf/d of storagewithdrawals, and call a customer specific operational flow orderthe following day. System inventory also dropped below the normaloperating range on Thursday, but no OFO was called.

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

To complicate matters, upstream gas pipelines have beenconducting maintenance programs that reduced gas flowssignificantly last week. Transwestern Pipeline was conductingmaintenance on compressors in the San Juan Basin, reducing gasflows by as much as 400 MMcf/d at times. Ongoing maintenance on itsmainline West of Thoreau segment already was reducing flows byabout 60 MMcf/d to California.

Maintenance on El Paso Natural Gas’ north mainline reduced gasflows to California by about 250 MMcf/d, and the south mainline hasbeen limited by about 200 MMcf/d because of the rupture thatoccurred on the pipeline in August. The pipeline also had anunauthorized overpull penalty in effect all week until Wednesday.

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

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

“Yes it does sound like a lot [of generation is down] until youbreak it down,” said CAL-ISO spokesman Patrick Dorinson in aninterview on Wednesday. “About 7,000 MW of that [12,000 MW] isplanned 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 whateverreason. That brings you down to 6,000 MW and that’s very manageablegiven the fact that we’re in a lower load period.”

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

“During the summer when we were running 45,000 MW days onaverage, we were out probably 2,500 MW a day in forced outages. Addto that the fact that our normal imports from the PacificNorthwest, which used to be roughly around 7,000 MW this time ofyear, are down to 4,000 to 4,500 MW because they need it; theirdams don’t have any water behind them either. You add all thattogether and you have a problem.”

Potentially adding to the problem going forward, Dorinson said,is the state of generator emissions credits. Because so many powerplants were running full tilt all summer, many generators are verylow on emissions credits. Some may have to shut down their plantsas a result. “I’m sure everybody is talking to the Air Qualityboard, as we are, to try and get some credits extended,” he said.

Although there were no major failures during the week, thesituation seemed to worsen on Friday at least in the gas market.Traders were reporting spot gas deals at more than $12/MMBtu. “Thishas been the coldest November in Southern California I’ve everseen,” said one marketer on Friday, “our power loads are verystrong.”

Rocco Canonica

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