Much like on the East Coast a couple of weeks ago, arecord-setting heat wave set in over the weekend in California andthe desert Southwest. The effect on western peaking power pricesMonday wasn’t nearly as dramatic as the $6,000/MWh numbers hitearlier this month in the New England pool; however, gas pricesshowed a much greater impact this time.

Resembling the screen-prompted spikes of last Thursday, spot gasprices rose about 20 cents or more across the board Monday. Butwhereas Thursday’s upticks were capped at around 30 cents, PG&Ecitygates and the Southern California border led the way Mondaywith gains approaching a dollar, topping out at more than $5. Twoweeks ago Northeast quotes failed to reach $4.

In the face of triple-digit inland temperatures (see related story in this issue), theCalifornia ISO (Independent System Operator) issued its first PowerWatch 2000 notice calling for energy conservation, then followed thatup with a declararation of a Stage One Electrical Emergency. Hourlyintraday peaking prices spiked to $863/MWh in response; moreimportantly to gas traders, though, were day-ahead peaking prices thatgot as high as $470.

“I don’t think anybody got caught by surprise by California’sheat wave,” said a marketer, “but maybe it was hotter thanexpected. What’s the difference between 95 degrees and 100, anyway,when you’ve just come out of the 70s?”

A marketer buying very large volumes at the border (“I’ve got alot of power plants to feed, and it’s really hot!”) in the area of$5 blamed a “stupid SoCal Gas OFO” for causing Monday’s situation.The OFO caused everyone to get behind on supplies over the weekend,he said, “and now we’re having to make up for lost time.” Anothersource, noting that PG&E had a customer-specific OFO in effectSunday, commented, “I can guarantee you that [high-inventorysituation] is gone now. We might even head to a low-inventory OFOby Thursday.”

Despite the heated air conditioning demand in much of the West,prices there echoed the overall market in softening during latedeals. A screen that spent the first part of the morning severalcents higher did an about-face and headed south later to aneventual fall of almost 8 cents, and like rats following the PiedPiper, cash numbers did the same. The late softness in futures (thecrude oil and heating oil contracts saw huge losses) almostcertainly will keep cash prices declining today, sources said.

It was a crazy day, said one aggregator who sold Henry Hub earlyat its peak of $4.00-01. Then the last trades of the day had fallenabout 18 cents.

It used to be a big deal when Chicago citygates surpassed $4 asthey did Monday, observed a marketer. “But it’s not such a big dealany more now that nearly all prices are close to $4 or greater.”

Not counting California numbers, most of Monday’s larger pricehikes were occurring in the Rockies and Southwest basins. They gotan extra boost from Williams Field Services starting a maintenanceshutdown today at its Ignacio (CO) Plant, which had been averagingvolumes of about 500 MMcf/d, a WFS spokesman said. Ignacio flowwill go to zero for a while, then gradually return to full capacityby Thursday evening as work is completed on various components, hesaid.

As if California and Southwest power generators didn’t haveenough problems with a unit of PG&E’s Diablo Canyon nuclearplant still in cold shutdown, the Palo Verde 1 nuclear unittripped off Sunday night due to the failure of a main turbinegenerator regulator. However, the unit was at 12% power and rampingup Monday, according to the Nuclear Regulatory Commission.

It was a quiet day in Canadian markets due to the nation’sVictoria Day holiday. A U.S. trader said very little gas got tradedat Malin because of the holiday, and because of that “I’m sure youwill see quite a spread [from Malin] to PG&E prices.”

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