Spot gas prices in Southern California climbed above $7/MMBtu in June 29 trading as the region turned to gas-fired generation to cope with an ongoing heat wave while power imports dropped.
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Cash SoCal city-gate gained 52 cents to reach $7.07/MMBtu in June 29 trading for next-day flows, according to preliminary settlement data. Spot gas price locations that represent entry points for gas flowing toward the SoCalGas system saw similar movement: SoCal Gas spiked $1.63 at $6.97/MMBtu.
Thermal power demand in the California Independent System Operator footprint has exploded over the last several days since the West Coast heat wave began in earnest. CAISO data showed that thermal power generation increased 58% to 331 GWh on June 28, up from 210 GWh on June 26.
While thermal power, the category used by the California system operator, include both gas- and coal-fired generation, there is only one remaining coal-fired power facility in California and the term largely refers to gas-fired generation.
Lower power imports
Even as California's total power demand rose, power imports into California dropped 36% to 85 GWh on June 28 from 133 GWh on June 26. Month-to-date daily power imports have averaged 125 GWh/d.
The geographically expansive nature of the heat wave has meant that the Pacific Northwest's power and gas demand increased at the same time as Southern California. Portland and Seattle saw record-breaking temperatures over three consecutive days, beginning June 26 and peaking June 28 at 116 Fahrenheit and 108 F, respectively, according to the US National Weather Service. The "historic" and "unprecedented" heat wave, the US National Weather Service said June 29, resulted in excessive heat warnings, watches and advisories throughout most of the Northwest, Great Basin and California.
Mid-Columbia and John Day on-peak day-ahead jumped to three-year highs, trading in the mid-$310s/MWh for June 27-28 delivery, according to S&P Global Platts data. California-Oregon Border on-peak day-ahead for the same delivery period saw a similar increase to price in the mid-$320s/MWh, its highest level since August 2020, while Nevada-Oregon Border climbed to the low $270s/MWh.
Weak hydropower conditions may also have hampered power imports. The Dalles Dam water supply forecast is at 83% of normal for the April-September forecast period, according to the Northwest River Forecast Center.
Some relief looked to be on the horizon for regional spot gas prices, with the prospect of lower temperatures and stronger inflows of gas from Canada.
The National Weather Service forecast that the upper-level high-pressure system responsible for the heat wave could weaken by July 1.
The cooler temperatures, combined with an unexpected increase in West Canada-to-Pacific Northwest gas pipeline capacity through July 9, is likely to deflate spot gas prices in the near term.
However, with the summer heat just beginning, elevated spot gas prices are expected to return. The most recent S&P Global Platts Analytics M2MS forward curves put the SoCal city-gate July contract at $7.255 and the August one at $7.495/MMBtu.