Ongoing power price spikes in the California market are directlyrelated to natural gas prices running $60 to $75/MMBtu, accordingto Kellan Fluckiger, COO of the Cal-ISO, who announced another day,Tuesday, of Stage One and Two power alerts.

It was necessary to “soften” the $250/MWh price ceiling on bidsto the grid operators in order to keep generators running theirnatural gas-fired plants, since at $65-70 wholesale spot gasprices, those plants cost $650-700/MW just for fuel costs,Fluckiger said. Otherwise, the plants would shut down down becausethey would be losing up to $50,000/hour of operation for fuel costsalone.

“A peaking unit with a poor heat rate (15,000 instead of10,000), buying $75 gas would actually cost $1,125 to create amegawatt. Add to that emissions and O&M costs and you might getprices of $1,500 or $1,200 based on those gas prices.”

Gas prices similarly are causing generators to take theirsupplies out of the state’s day-ahead wholesale spot market(Cal-PX) and sell it in the Cal-ISO’s real-time emergency suppliesmarket, which is representing an increasing percentage ofCalifornia’s power market, continuing to drive up average prices.Cal-ISO’s market role ideally should be to provide last-resortsupplies to assure grid reliability, making up less than 10% of thestate’s power deals, Fluckiger said. Instead, it has been about20-30% of the market.

“One of the goals we absolutely have is getting these bids outof real-time and into the forward markets,” Fluckiger said. “We areabsolutely working on this and expect some of FERC’s order (Friday)to help move these bids out of the real-time market.

“The enormous cost of gas and electricity is putting tremendousstrain on a lot of entities — the utilities particularly. Ithasn’t affected our ability to get the megawatts needed, but it isclearly a looming concern as we go forward.”

On Tuesday, about 8,500 MW of load continued to be out ofservice, but Fluckiger said the weather situation in the PacificNorthwest was easing and that might free up more imports, and bythe end of the week, he hopes to have some in-state generators backonline totaling 1,000 to 1,500 MW.

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