"California Power Facing Biggest Test Since Enron: Energy Markets"

From Bloomberg:

California may face the biggest regional power shortages in more than a decade this summer, sending wholesale prices higher, as idled nuclear reactors and low hydroelectric output cut generating capacity.

The California Independent System Operator Corp. said last month that managing the state grid, especially in parts of Southern California, will prove “difficult” because the system will be operating without Edison International (EIX)’s San Onofre nuclear power plant and two natural gas-fired units, while hydroelectric output will be at a three-year low. The nuclear plant, California’s single largest source of baseload power, accounts for 3.7 percent of the state’s capacity.

Southern California wholesale electricity for July through September already is at the highest level for this season since 2008 on the outlook for a shift to costlier, more volatile fossil fuels. A strain on the grid could lead to power failures reminiscent of the state’s worst energy crisis in 2000 and 2001, when generation shortfalls and market manipulation by traders at companies including Enron Corp. sent prices to record highs and triggered blackouts that affected millions of customers in the most populous U.S. state.

“California may see the biggest test since Enron manipulated the market,” Stephen Schork, president of Schork Group Inc., an energy consulting group in Villanova, Pennsylvania, said in an April 15 interview. “If you have a reactor down and you don’t have as much hydro, your fuel for air conditioning is going to have to come from gas.”

Electricity at Southern California’s SP15 hub for July through September rose $1.55, or 2.6 percent, to $61.40 a megawatt-hour yesterday, a five-year seasonal high. Prices today fell 5 cents, or 0.1 percent, to $61.35.

Rising Prices
Electricity at the SP15 hub for next-day delivery has averaged $49.70 a megawatt-hour this year through April 18 on the Intercontinental Exchange, the most for the period in five years. Northern California’s NP15 hub has averaged $41.99 this year, the most since 2010.
The shutdown of the San Onofre reactors boosted prices at the southern hub to an average premium of $7.81 a megawatt-hour against the northern hub, the most in 12 years. The five-year average is 95.65 cents.

Abundant hydroelectric generation made up for the lost nuclear output in the Los Angeles basin last year, Michael Blaha, the principal analyst of North American power at Wood Mackenzie Ltd. in Houston, said in an interview.
“There is always a threat of brownouts and blackouts and I think it’s higher this summer because of San Onofre being out and you’re not putting hydro into the basin,” he said.

Weaker Hydro
Final snowpack measurements, which are used to predict the output at hydropower dams, will be 45 percent to 50 percent of normal, according to Maurice Roos, chief hydrologist with the state’s Department of Water Resources in Sacramento. Only six years in the past 60 have been that low, he said....MORE

HT: Kedrosky