US Northwest power prices soar, traders fear bankruptcies

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US Northwest power prices soar, traders fear bankruptcies Tuesday December 5, 3:04 PM EST By Nigel Hunt

LOS ANGELES, Dec 5 (Reuters) - Prices for electricity in the U.S. Northwest skyrocketed on Tuesday, sparking renewed talk that the region's power markets are broken and concern that some marketers may be on the brink of bankruptcy.

"Marketers who are short may not be in business for much longer. We are worried about the credit of the people we are trading with. It is not a good situation," one Northwest power trader said.

Prices for electricity for the rest of December at the key Northwest hub of Mid-Columbia soared as high as $1,200.00 per megawatt hour (MWh) on Tuesday, up from $500.00-$525.00 per MWh on Monday and an already steep $290.00-$305.00 on Friday.

In contrast, electricity for delivery during the balance of December at some hubs in the eastern U.S. has been trading around $60.00-$70.00 per MWh, around one-twentieth of prices at Mid-Columbia but still considered high for those areas.

The rise in prices came amid concern whether it will be possible to generate enough power in the U.S. West to meet demand, with loads expected to rise if forecasts of extreme cold arrives either late this week or early next week.

Summer heatwaves sparked a series of power emergencies in California this year with a buoyant economy boosting loads across the region. There have also been few power plants built during the last decade partly due to uncertainly surrounding the deregulation of the industry.

CONCERNS OVER NORTHWEST SUPPLY CRUNCH

The crisis has now spread to the northwest states of Washington and Oregon, where electricity is often used for heating. Those states export power to California in summer to help it meet its load but flows reverse in winter as heating demand grows in the northern states.

This year California appears in poor shape to provide much help to its northern neighbors and has even been struggling to supply its own loads, declaring power emergencies on both Monday and Tuesday as reserves dipped precariously low.

"California is a mess. It all originates from there," one Northwest trader said.

California was on the verge of ordering rolling blackouts across the state numerous times this summer. A localized series of blackouts was ordered in the San Francisco Bay area on June 14 due to a power shortage but none on a statewide basis.

Despite the warnings, officials at Washington State's Utilities and Transportation Commission (UTC) said they did not anticipate running out of electricity.

"Unless we have extremely cold weather...there are adequate supplies in the Northwest. The prices are likely to be quite high, but nothing I've heard would indicate we have a supply problem," Dick Byers, UTC director of electricity policy, said.

HYDROPOWER, NATURAL GAS SHORTAGE

The latest crisis has been exacerbated by a shortage of both hydropower and natural gas.

"It is really hard when you've got water and gas working against you," one trader for a Northwest utility said.

The water shortage had reduced flows through the massive hydropower dams in the Pacific Northwest while the region is also heavily dependent on power from gas-fired power plants.

Natural gas at the Southern California border traded as high as $27 per million British thermal units Tuesday, up $4.00 from Monday and more than 10 times the $2.30 price seen a year ago.

The latest rise in power prices has renewed concern that power markets in the western states are not truly competitive.

Earlier this year several investigations were launched into record high power prices in California, including one by California Attorney General Bill Lockyer.

And last week a class action lawsuit was filed in San Diego charging 14 energy companies with deliberate manipulation of prices in California's electricity market.

The chronic power shortage in the west led one utility on Monday to call on its customers not to turn on their holiday lights until after 10 p.m. PST.

Rosemead, Calif.-based Southern California Edison, a unit of Edison International (EIX), asked for the delay.

The California ISO has estimated the holiday lights in the state use around 1,000 MW of electricity.

http://money.iwon.com/jsp/nw/nwdt_rt.jsp?section=news&news_id=reu-n05491394&feed=reu&date=20001205&cat=INDUSTRY

-- Martin Thompson (mthom1927@aol.com), December 06, 2000


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