NGI The Weekly Gas Market Report
The severe winter cold snap last week triggered unprecedentedprice spikes at spot points in the Pacific Northwest and NorthernCalifornia. PG&E Citygate prices hit $6.18/MMBtu on Monday andwere near $5 on Tuesday. Prices jumped to $11.05/MMBtu at Sumas onthe previous Friday for weekend flow, and on Monday and Tuesdaystayed north of $6.
Peaking power demand and near peaking gas demand promptedshort-lived emergency flow orders in Northern California with steeppenalties for noncompliance, and forced Pacific Gas and ElectricCo. to curtail some gas and power flowing on interruptibletransportation (IT).
“We have somewhat of a coincident peak with the electric sidegoing on,” noted Mike O’Donnel, director of gas system operationsat PG&E. “I’ve seen it in the past. When we get extremely cold,I think you see some electric space heating and they take off onyou a bit. So we went into an [emergency flow order on Monday].”From the previous Friday to Monday, gas demand on PG&E’s systemrose 40% to 4.5 Bcf/d as space heating needs soared and powergenerators scrambled to find fuel.
“Our southern path, what we call our Baja Path (line 300), wasrunning at capacity (1.2 Bcf/d). And our northern path, withCanadian gas coming in, was running at about 1.4 Bcf/d, with theupstream line limiting capacity to about 1.8 Bcf/d, so we had 400MMcf/d of room there. We were also forecasting full utilization ofstorage. We were seeing demand higher than we had supply comingin.”
The situation prompted PG&E to issue a zero toleranceemergency flow order Monday with steep $50/Dth penalties fornoncompliance and another operational flow order Tuesday with a 5%tolerance and $25/Dth penalties for noncompliance. The utilityurged customers to keep a close watch on their usage and on thewell-below-normal temperatures. About 172 MMcf/d of gas flowing oninterruptible transportation was cut on Monday and another 151MMcf/d was curtailed the following day.
“We’re seeing most of the western U.S. in an extremely coldweather situation that is very unseasonable. The mean temperatureon our system usually is at about 46 degrees, and we’re trying tosupply a load that is at 34 degrees right now. That’s extreme,” hesaid on Tuesday. “We designed our system to meet 29 degrees andthat is only meeting core load, so all of the industrial and largecommercial load is off.” Meanwhile, power load was soaring.
“Going into the day, we had an estimated demand on the electricside that exceeded supply and we were concerned about that.” TheCalifornia Independent System Operator declared a Stage TwoEmergency Monday morning forcing PG&E to curtail 400 MW of powerflowing on IT on its electric system. The ISO said operatingreserves of power fell below 5% primarily because of a gas supplyshortage, a conclusion confirmed by PG&E’s Utility ElectricGeneration division.
O’Donnel said gas demand for power generation in PG&E’sterritory exceeded available supply by about 150 MMcf/d. “Theybought all the gas they could find,” said PG&E’s Mike Katz,manager of the utility’s power generation portfolio. “If we wouldhave had more gas, we would have sold more electricity into theenergy market.
“What we saw was that people who were out trying to purchase gaswere not able to get gas into our system.” Buyers throughout theentire Pacific Northwest were scrambling to find gas for spaceheating and power generation needs. Canadian producers may berejoicing over new access to high-priced Chicago markets, but newsthat traditional Pacific Northwest and California markets arereaching new demand peaks should bring a little extra Christmasjoy.
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