Southern California gas and power prices are registering some of their highest prices in years as the market deals with potentially record-breaking heat, hitting at a time when both gas and power markets are dealing with supply disruptions. The contributing factors are lining up to persist through the rest of this week.
SoCal Citygate gas price has printed $14.00/MMBtu on the ICE this morning, October 23, and Genscape’s CAISO power desk model is showing next day on-peak average power price for SP-15 at $176.97 with a peak hour price above $700.00. If the gas price holds, this would set a record high cash price in Genscape’s data history dating back to 2008.
Genscape meteorologists are forecasting population weighted cooling degree days (CDDs) for SoCal will run well above normal this week, approaching a high tomorrow near 20 CDDs , about 18 CDDs above normal.
Genscape’s CAISO power desk load forecast has peak hour generation in the CAISO exceeding 37 GW today and tomorrow, with SoCal Edison plus San Diego Gas and Electric combined loads accounting for more than 24 GW alone.
Satisfying this load requires more gas-fired generation to move within SoCal market boundaries. This is because power import transmission lines are undergoing maintenance that is limiting import capacity into CAISO by roughly 3,300 MW. In addition, Genscape’s CAISO desk noted wind generation is in a lull period this week.
Gas prices will be pressured not only by this increased in-market generation, but also by pressure on flowing supply into the market. SoCalGas is conducting unplanned maintenance on two major lines that flow gas into the market from Arizona, with both events expected to run through the duration of this heatwave. SoCal’s receipts at its Topock points have been restricted to 0 MMc/fd since July 2016 due to Line 3000 remediation, a 539 MMcf/d opcap reduction. Then on September 18, SoCal began a second unplanned remediation event on their Line 4000, which reduced firm capacity in the Northern Zone by 740 MMcf/d. On top of that, an explosion on SoCal’s 235-2 line on October 1 near Barstow, CA, prompted the declaration of a Force Majeure that cut receipt capacity at their Needles points to 0 MMcf/d, a 796 MMcf/d reduction. This event effectively limited the opcap of all points in the Northern Zone to zero except one, the Kern/Mojave interconnect at Kramer Junction. In total, these three events have cut SoCal's operational capacity to import by 2,075 MMcf/d.
Exacerbating these restrictions: PG&E is initiating planned maintenance at its interconnect with El Paso, which Genscape believes could cut Baja Path gas flows and deliveries to SoCal. PG&E’s receipt capacity from El Paso at Topock will be limited to 0 MMcf/d beginning tomorrow and lasting through Monday, October 30. This interconnect has provided about 60 percent of total Baja Path flows this year, and has averaged 247 MMcf/d in the past month. PG&E should be able to accommodate for these lost flows by withdrawing from their ample storage reserves, but the drop in Baja Path flows may actually have more impact on SoCal, which has received a past monthly average of 285 MMcf/d from the Baja Path’s northbound flows. Significant past drops in PG&E’s receipts from El Paso sometimes correspond to drops in PG&E’s deliveries to SoCal.
SoCal is adjusting to these capacity restrictions by swinging more gas in from other lines, and withdrawing from storage inventories that are already critically low due to the issues with Aliso Canyon storage. The one available point in the Northern Zone, Kramer Junction, has had its opcap limit increased by approximately 125 MMcf/d on an interruptible basis, effective beginning today. This point had already increased its average receipts to near 100 percent capacity following the Line 235-2 Force Majeure, so this measure provides some additional import potential. SoCal imports via its South Desert Zone (El Paso, North Baja, and Transportada de Gasoductos Norte (TGN)) have been running well in excess of 1 Bcf/d, including a record high 1,248 MMcf/d on October 10. Part of this bump has been supplied by a resumption of imports from Baja, Mexico via the TGN pipeline, the first time SoCal has imported from TGN since May. As a result, SoCal’s South Desert zone utilization is running at about 85 percent capacity, when it normally operates closer to 65 percent.
With import pipelines reaching high utilization, SoCal has supplemented gas supply with withdraws from storage. Since the Line 235 rupture on October 1, SoCal has posted four days of storage withdraws (including one day of 189 MMcf/d), placing additional stress on storage inventories ahead of the winter. Though inventories are at about 4.6 Bcf above last year’s same-date levels, they lag the five-year average by more than 47.3 Bcf due to the limitations imposed on Aliso Canyon, the largest storage facility in the Pacific Region that sprung a leak in October 2015.
In advance of anticipated volatility to the gas price, yesterday, the CAISO issued a notice re-authorizing the “Gas Price Index Scaling Factors.” This is a program created by the ISO in May 2016 in the wake of the initial Aliso Canyon leak. The program allows generators to increase the reported price they pay for gas in order to help ensure fuel supply during times where prices and/or supplies may be at risk. The program was cancelled in June 2017, but re-implemented on a few, temporary occasions throughout peak periods of the summer. Yesterday’s notice increases the scalar to 175 percent of the gas price in the unit commitment cost, and 125 percent of the gas price in the energy bid calculation.
These peak conditions are likely to last through the week. As noted, temperatures are forecast to remain substantially above normal. At the same time, the inbound power transmission and gas pipeline constraints from maintenance will remain in effect.
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