Although it doesn’t need to revise its power forecasts for the region, the Northwest Power and Conservation Council’s power planning director Monday told the group’s oversight board power committee that natural gas prices were high even before the Gulf of Mexico hurricanes and they have increased dramatically following the back-to-back natural disasters. The power council’s plans shaped late last year anticipated the type of wholesale gas price volatility being experienced, according to Terry Morlan, the council planning director.

“Last week Henry Hub spot prices were near $14/MMBtu, as were futures prices for the coming winter,” Morlan told his power committee in a written statement released Monday.

In this environment, merchant generators in the Pacific Northwest that have operated sporadically in recent years in the face of cheaper alternatives are now starting to operate more as the wholesale prices for power are catching up with the higher gas prices, Morlan told NGI/Power Market Today in a brief interview Tuesday. “It is a little too early to say what the long-term effect of this whole thing is going to be,” he said. “No one expects gas prices to fall a lot this winter because the production isn’t coming back real fast in the Gulf. It will take time to recover.

“On the other hand, storage levels are in pretty good shape, especially in the West. We have a good storage situation, and if the demand is dampened by the high prices, we may not see much in terms of higher prices this winter, although I don’t think they will drop way down, but there are some situations where they could be fairly moderate, especially if we had fairly mild winter. We have very little impact on the gas prices, though, when you look nationally. That impact comes more in the Midwest and Northeast.”

The Northwest Council’s forecast still holds for the winter, Morlan reinterated, meaning power supplies in the four-state region are more than adequate, but the prices may be quite high at times.

“We have a pretty good surplus of generating capability right now,” he said. “And it is mostly centered in the independent power producers, so when they are operating we are going to be paying fairly high prices for electricity on the spot market at least.”

Reliability of the grid and its future operations are more unsettled, Morlan said, as the federal Bonneville Power Administration (BPA) and its major private- and public-sector customers struggle to create a hybrid regional transmission organization (RTO) that is less tied to the Federal Energy Regulatory Commission than other RTOs around the country.

“We’re struggling mightily here with the concept of Grid West and others,” Morlan said. “It is unclear how the progress is going on that. It is not clear right now that we are going to resolve all of our problems real quickly.”

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