August California electricity expenses set record

California's wholesale electricity costs were a record $4.5 billion in August, topping by about $1 billion the previous record set in June, the California Power Exchange (PX) says in a monthly assessment of the market. As a result, August should have been generators most profitable month since the California wholesale market began operating in the spring of 1998, it says.

Oct. 13, 2000

2 min read

Through August, wholesale power costs, including ancillary services, totaled about $14.2 billion. For all of 1999, costs totaled $7.3 billion, says the California PX, which operates the California wholesale market.

As a result, August 2000 should have been generators' most profitable month since the California wholesale market began operating in the spring of 1998, according to the California PX.

"These record earnings were achievable even though the cost of natural gas fuel averaged higher than in any of the previous months," California PX analysts say. An efficient gas-fired generator might have earned at least twice and perhaps three times as much net operating income over the past year as it needed to meet expenses and provide investors with a reasonable return, according to the report.

The performance could have been achieved even though neither record load or prices were set during the month, it says. However, the California PX says prices and loads consistently reached high levels, with peak loads greater than 40,000 Mw occurring on 11 days.

During the time the $500 Mw-hr cap was in effect, prices reached that level on all four days it was effective, and prices reached or nearly approached the lower $250 Mw-hr cap on most weekdays throughout the month.

California PX analysts concede the actual earnings of older generating plants could have been much lower in August than they have calculated, because they do not take into account emissions trading credits, which increased through the summer as many generators ran more hours than expected. Buying emissions trading credits could have raised operating by $52-$210/Mw-hr.

The California PX is predicting prices are likely to stay high thanks to rising natural gas prices and delayed power plant upkeep. With a warmer than normal fall forecast for southern California and Arizona and as much as 4,500-5,000 Mw down for maintenance, north to south congestion is already showing up during off peak hours on Path 15, the report says.

"Therefore, a return to average PX prices in what might have been considered 'normal' ranges prior to May 2000 appears improbable any time soon in either northern or southern California," the California PX forecasts.