It was a no-brainer to predict Thursday’s plunging market. Amajority of price losses were between 80 cents and a dollar, aschilly but seasonally mild weather prevailed in most areas, thescreen continued to go south and traders perceived AGA’s Wednesdayafternoon storage withdrawal report of 167 Bcf as a below-parvolume.

Although Malin and the PG&E citygate joined the overallprice dives, the Southern California border stuck out like a sorethumb with a gain of about 40 cents while the state teetered on thebrink of a power crisis. It was evident that every gas-firedgeneration unit in California that could get a flame up was beingpressed into service as the Independent System Operator declared aStage Three Electrical Emergency and ordered rolling blackouts forup to 4,000 MW during the evening hours (see related story).

About 15,000 MW, or more than a third of total power capacity,was offline Thursday, said Cal-ISO. The amount of power unavailableto the grid increased by 1,600 MW when four units went down, itsaid. The situation was aggravated by a powerful Pacific stormcausing heavy surf that clogged the cooling water intake valves atthe Diablo Canyon nuclear plant, forcing the facility down to 20%operations.

The California Power Exchange reported power commanding auniform $1,000/MWh for same-day purchases in the evening. Day-aheadnumbers were peaking at $536/MWh.

“My Northeast market is pretty dull in comparison to what’sgoing on in California,” commented a marketer who indicated he wasnot disappointed by the relative calm in the East. Prices came offThursday mainly due to the screen softness and fairly benignweather for mid-January, he said. “We’ll probably be looking a bithealthier on the storage situation for a while because there areunlikely to be any huge weekly withdrawals from now on.”

The marketer went on to say that even though a holiday weekendis upcoming, he doesn’t expect further big drops today. He thinkspeople will cut back on storage withdrawals and buy more spot gas,now that prices have fallen well below index.

One Gulf Coast trader said he was seeing few problems so farwith processing reductions except on ANR/HIOS. However, aHouston-based risk manager reported hearing of rich gas problems onSonat, Tennessee and Columbia. With gas prices so high and liquidsprices so low in comparison, it makes sense for producers tounderprocess the gas to obtain a higher heat rate out of eachmolecule. Most interstate pipelines require that receipts be noricher than about 1,020 Btus per cubic foot, he said. “In the shortterm, anything higher than that can cause damage to the turbines ofpower generators downstream as the burn dynamics of the flamechange significantly. In the long run, the pipeline itself willsuffer as these heavies [propane and butane] congregate in thepipe, effectively reducing the pipe’s diameter. To solve thisproblem, many pipes will be forced to engage in extensive piggingoperations, at considerable cost, this summer.”

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