Spot prices appeared to be aimed at escaping earth’s orbit Mondayas they skyrocketed by huge amounts, led by several western pointsrecording increases in triple digits. A strong screen had someinfluence, but it was frigid weather saturating most of the NorthAmerican continent and prompting a plethora of pipeline OFOs (see Transportation Notes) that played thebiggest role in a market that awed many participants.

California and Pacific Northwest points saw no quotes below $10,and Sumas topped out at $18. Northwest Pipeline once againtightened requirements of its “must-flow OFO,” saying thatbeginning Wednesday shippers with primary corridor rightssouthbound through Kemmerer (WY) Station must flow up to 30% oftheir contract demand from north-end receipt points to deliverypoints south of Kemmerer. That further enhanced the value ofsupplies at Sumas, Stanfield and Kingsgate, which saw average gainsranging from about $5.50-55 for Stanfield and Kingsgate to nearly$7.30 at Sumas. Although domestic gas saw a dollar-plus rise onNorthwest, the Sumas/domestic now exceeds $9.

The main problem is that Northwest has plenty of gas in storageat Clay Basin in Utah (south of Kemmerer) but not enough at JacksonPrairie in Washington, said one trader. In past years the expensivegas was from the south and the cheaper stuff was from the north, hewent on, but now market economics in the region have changed,causing the situation at the two storage facilities, along withthroughput constraints at Kemmerer.

All three California trading points advanced more than $4 as theCalifornia Independent System Operator declared another Stage OneElectrical Emergency. PG&E issued a stringent low-inventory OFO(see Transportation Notes) and bordertraders continued to wrestle with the conditions of SoCal Gas’five-day balancing period. Day-ahead peaking power prices posted bythe California Power Exchange went as high as $220/MWh, giving powergenerators ample incentive to keep bidding up gas prices. Aggravatingthe gas price situation was an OFO on El Paso and Transwestern’sextension of a West of Thoreau capacity constraint beyond itsscheduled ending (see TransportationNotes).

Palo Verde 2 was at 19% power as it recovered from a reactortripping offline, according to the Nuclear Regulatory Commission.One source said the Diablo Canyon 1 nuke, which was slower thanexpected in returning from a refueling outage last week, also hadtripped offline, but NRC’s “Plant Status Report” Internet sitelisted it at 46% operation.

A marketer and an official of SoCal Gas clarified conditions ofthe giant LDC’s five-day balancing rule, now in its fourth winter.The rule is invoked at the beginning of inventory managementseason, which is November-March, the marketer said. It involvesrevolving five-day periods, not necessarily Monday-Friday as wasreported to Daily GPI Friday; that is, it goes each month for the1st-5th, 6th-10th, etc. In a non-Leap Year February, the lastperiod is three days, said the SoCal official, and it lasts sixdays in 31-day months; otherwise the concluding five-day periodcomes out even.

The level of SoCal storage inventories determines the balancingrequirements. The utility is currently just shy of 50 Bcf, and thathas triggered a rule that at least 50% of a customer’s five-dayburn must be covered by physical flowing gas or firm storage;interruptible storage won’t hack it, the marketer said. For anyshortfall below the 50% level, the shipper must pay 150% of thehighest Daily GPI price recorded for the Southern California borderduring the five-day period (that’s the absolute peak number, notthe highest daily average, emphasized the SoCal official).

If SoCal storage should fall to 40 Bcf, then the physical/firmstorage requirement rises to 70% and balancing shifts to a dailybasis. If storage gets down to 25 Bcf, then the level jumps to 90%on a daily basis for the rest of the season. “That means there isno turning back to less rigorous balancing,” the marketer said.”The market can get really ugly at those times.” The reason tradersare citing the balancing rule as a big factor in pushing prices sohigh currently, is that it was a non-issue last year during thewarm winter, he added.

With such price fireworks going off in the West, it was almostan afterthought that upticks in the East, while not as spectacular,certainly weren’t shabby either. Virtually every point gainedaround 60 cents or much more, and some quotes at Northeastcitygates surpassed $7.

Utility load was very strong due to the cold weather, a Gulf Coastmarketer commented. He was chagrined, though, to learn that a FloridaGas Transmission outage in Zone 1 (southeast Texas) that was scheduledto end Dec. 1 had been extended through the end of the year (see Transportation Notes). “That’s going tocost me some money,” he said, because the outage limits his ability todeliver South Texas gas to lucrative markets in East Texas downstreamof Station 4.

Henry Hub, which traded about half a dollar below the screen asrecently as Friday, was in a dead heat with the December contractMonday.

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