US West power prices rise as record-breaking heat wave prompts weather advisories

Western US wholesale power prices are climbing in response to a record-breaking heat forecast across the Southwest and southern California.

The temperatures have prompted excessive heat warnings and heat advisories over parts of Southern California and the Southwest, the US National Weather Service said in its Oct. 1 forecast discussion.

“The upper-level ridge over the Four Corners Region will create high temperatures over Southern California and the Southwest, ranging from the upper 90s to 110s,” the weather service said. “Low temperatures will be in the upper 80s to low 90s, providing little relief from the heat overnight.”

Population-weighted average daily temperatures are forecast to reach 74 degrees Fahrenheit Oct. 2 across the CAISO footprint, well above to the historical average for October of nearly 60 F, according to CustomWeather data.

In reaction to the climbing temperatures, the California Independent System Operator forecast peakload to spike to 41.462 GW Oct. 2, a 28% jump from the prior seven-day average, according to CAISO data. In comparison, peakload averaged 29.684 GW in October 2023.

No flex alerts have been issued or are planned, CAISO spokesperson Anne Gonzales told S&P Global Commodity Insights Oct. 1, adding CAISO has not issued a flex alert since 2022. CAISO’s all-time peakload is 52.061 GW reached Sept. 6, 2022.

“The California ISO is closely monitoring the rise in temperatures this week,” Gonzales said. “The ISO continues to forecast sufficient energy to cover demand through this week and does not anticipate any supply shortfalls.”

No wildfire activity is threatening assets at this time, she added.

Power prices on the rise

Wholesale spot power prices are climbing in reaction to the rising temperatures and demand forecast.

Palo Verde on-peak day-ahead traded around $68/MWh for Oct. 2 delivery on the Intercontinental Exchange, a jump of nearly 40% from the prior seven-day average, according to pricing data from Platts, part of S&P Global Commodity Insights. Mead on-peak day-ahead traded around $72.75/MWh on ICE, 47.5% higher than the prior seven-day average, according to Platts data.

Likewise, SP15 on-peak day-ahead traded around $54.25/MWh for Oct. 2 delivery on the Intercontinental Exchange, which is nearly 62% above the prior seven-day average, according to CAISO data. The on-peak balance of the week package was bid at $47/MWh and offered at $50/MWh on ICE.

Gas demand, prices

Total gas consumption in the state was 5.6 Bcf/d on Oct. 1, up from 4.8 Bcf/d in the previous seven days and the highest level since Sept. 9, according to Commodity Insights data.

The spot gas price at PG&E city-gates rose to $4.65/MMBtu for Oct. 1 flows, its highest point since mid-January, according to Platts data. It eased to $4.10/MMBtu for Oct. 2 flows, but was still well above the average price of $3/MMBtu for flows in the seven days prior to Sept. 30.

The SoCalGas city-gates price similarly hit an eight-month high of $3.42/MMBtu for Oct. 1 flows, and rose further to $3.72/MMBtu for gas flowing Oct. 2, Platts data showed. It had averaged $2.55/MMBtu in the week to Sept. 29.