1. Summer 2000 – Present in California
Date Event (Prices are per MWh)
May-Jun ‘00 ISO’s real-time price reached $750 ten times
Jun. 28 PX’s day-ahead price (NP15) reached $1,099
July 1 ISO lowers the price cap from $750 to $500
Aug. 7 ISO further reduced the price cap to $250
Nov. 1 FERC issued an order, proposing a “soft cap”
of $150 as an interim remedy
Jan. 8 ‘01 Gov. Gray Davis declared deregulation a “colossal
and dangerous failure” and proposed state intervention
Jan. 11 CA ISO issued first Stage 3 alert
Jan Rolling blackouts
Feb nd day of Stage 3 alert; State of CA has spent $1 billion in less than one month to purchase power
Apr. 6 PG&E filed bankruptcy seeking court protection

2. Cost of Electricity in California

3. Western U.S. Power Markets: Low, Stable Prices until mid 2000
Energy
crunch
Capacity
crunch
Calm
Source: NyMEX

4. Natural Gas Transmission in California
On August 19, an explosion ruptured 36-inch El Paso Natural Gas mainline near the Pecos River Crossing about 30 miles south of Carlsbad, NM, killing twelve people. About 900 MMcf/d of capacity initially was lost from the ruptured line and two looped lines nearby that were shut in. All three lines are around 50 years old. El Paso had managed to make up about 500 MMcf/d of the lost capacity by drawing on storage, diverting gas to an alternative route and through customer cutbacks. However, for every day the outage continues, storage for the already stressed California market and generators east of California is dropping by 500 MMcf/d. The primary market impact from the El Paso explosion was to push basis for the Southern California border to unheard-of heights that are expected to yield a September index easily surpassing $6.
Federal regulators responded with an order issued four days after the accident, requiring extensive testing and repairs before any of the lines could go back into service.
By increasing the pressure on two unaffected pipe-lines, 85 to 95 percent of the 2.1 Bcfd flow through the Carlsbad area has been restored. El Paso is awaiting the Office of Pipeline Safety’s final approval of repairs.
Source: EIA

5. Natural Gas Spot Prices
Daily Natural Gas Prices
0.00
10.00
20.00
30.00
40.00
50.00
60.00
12/31/1999
02/29/2000
04/30/2000
06/30/2000
08/31/2000
10/31/2000
$/MMBtu
Southern
California
Border
Henry Hub
Prices for Canadian supplies started to increase following the rupture on the El Paso system to the south
Each wave of cold weather has caused prices to increase
Prices have been higher recently in order for financially-strapped PG&E to attract supplies
Source: NG Daily Index

6. How much does rising gas prices affect electricity prices?
NP-15 Prices: “Nominal” and adjusted for natural gas prices.
200
400
600
800
1000
1/1/00
3/1/00
5/1/00
7/1/00
9/1/00
11/1/00
$/MWh
Original Price
Adjusted Price
Source: California PX

7. Prices Exploded Across the West
1999 Power Price
2000 Power Price
Mid Col $26.53
137.03
COB
$30.66
137.56
NP-15
$35.82
114.05
Four Corners
$30.39
114.43
SP-15
$32.69
110.94
CA PX
$29.36
91.33
Palo Verde $31.25
114.18
EVA: Power Markets Week, annual averages of day-ahead transactions
weekly indices. NP, SP-15 began