Agreeing with a request from NRG Power Marketing LLC to use more timely natural gas price data when market conditions tighten over a weekend, California Independent System Operator Corp. asked federal regulators to allow it to use the Monday-only gas price when running its day-ahead market Sunday.
The proposal is significant because it shows the grid operator is taking steps to account for the types of gas-price spikes that occurred during a heat wave last summer. The change could help address concerns that CAISO's current practice underestimates generators' exposure to fuel costs.
"With experience and through discussions with market participants, the CAISO now is aware of this index and believes it should have the flexibility to use this index," the grid operator said in a Nov. 5 filing (FERC docket ER18-2520) with the Federal Energy Regulatory Commission.
In late September, CAISO proposed to continue using seven key tools to maintain reliability this winter amid gas supply shortages caused by limited withdrawals from the Aliso Canyon gas storage facility and continued pipeline outages on the Southern California Gas Co. system.
NRG in October said CAISO should tweak the plan to use the Monday-only gas price when it runs its Monday day-ahead market Sunday. The company said intraday gas prices on Monday often trade at a significant premium to the three-day weekend package price the grid operator currently uses. Pointing to a heat wave that occurred last summer, NRG noted that on Friday, July 20, it observed that Monday-only gas prices were starting to trade significantly higher — at around $25 per dekatherm — than the weekend gas price, which was at $14 per dekatherm. On Monday, July 23, same-day gas prices soared to $44 per dekatherm, NRG explained.
The Intercontinental Exchange produces the Monday-only index at times when the gas market anticipates Monday will have much higher demand than Saturday and Sunday.
CAISO in its Nov. 5 filing agreed that it should have the flexibility to use the Monday-only gas price in its day-ahead market and proposed to revise its tariff to allow use of the index.
The grid operator's filing, which touched on a range of issues, also mentioned that SoCalGas's recently released winter 2018-2019 technical assessment found that curtailment of noncore customers, including electric generators, is likely. Noncore curtailment will be required during the winter season under all but the most optimistic conditions, such as warm weather conditions with minimal facility outages, according to the SoCalGas assessment submitted to the California Energy Commission on Nov. 2.
"SoCalGas may need to curtail between 3.2 and 63.5 Bcf of forecast noncore demand throughout the winter season, given certain assumptions regarding weather and facility outages, to maintain minimum inventory levels needed for core reliability," the assessment said.
Kate Winston is a reporter for S&P Global Platts, which, like S&P Global Market Intelligence, is owned by S&P Global Inc.
