Average daily spot electricity and natural gas prices dipped into negative territory this week in three U.S. states, Texas, California and Arizona, due to a regional glut caused by the overhaul of pipelines carrying gas from the Permian Basin to the Gulf Coast .
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In Romania, too, negative prices were recorded for the electricity traded on the day-ahead market (PZU) operated by OPCOM, but only during certain time intervals of some days, but the average daily prices were always positive. For gas, spot prices are close to the regulated price set by the government, of 120 lei/MWh, although they had also dropped below 100 lei/MWh before the announcement of maintaining the government’s price control policy.
Negative prices signal that a region is producing too much electricity or gas relative to current consumption. Producers can either reduce production, pay suppliers to take over their electricity or gas, or, if they can get permission from the authorities, “burn” the excess gas.
For several weeks, according to Reuters, traders have warned that gas prices at the Waha hub in West Texas will turn negative as pipelines carrying shale gas from the Permian Basin in West Texas to the Gulf Coast, operated by Kinder Morgan.
Kinder Morgan told customers it plans to reduce flows on the Permian Highway pipeline from May 7-12 and on the Gulf Coast Express pipeline from May 14-21.
The Permian Basin is the largest shale oil and gas field in the US.
When crude oil prices are relatively high, as they have been in recent weeks, producers are willing to take a loss from trading gas because they can cover it from oil sales.
Negative gas prices have also pushed electricity prices into negative territory as producers/traders unable to ship gas to the Gulf Coast try to ship higher volumes to the West Coast, which helps reduce already low electricity prices in California and Arizona, as much of that cheap gas is used for power generation.
Energy and gas prices are generally low in the spring as mild weather moderates both heating and cooling demand. Additionally, on the US West Coast, warmer spring weather is also melting snow in the mountains, increasing the supply of cheap hydropower.
Day-ahead gas prices at the Waha hub fell to a three-week low ($-2.72/mmBtu) on May 6, from +$0.25/mmBtu on May 3.
The average gas price in the Waha hub was negative in April ($-0.26), and positive since the beginning of the year (+$0.94) and in 2023 (+$1.82).
The day-ahead (DAU) power price at Arizona’s Palo Verde hub fell to a weekly low of -$2/MWh on May 6, from +$11.75/MWh on May 3.
In April, the average PZU price from Palo Verde was +$1.48/MWh, this year’s average was +$21.12/barrel, and that of 2023, +$59.03/barrel .
The day-ahead power price on Southern California’s South Path-15 (SP-15) platform in turn fell to a weekly low of -$3.25/MWh on May 6, from +12 .50 dollars/MWh on May 3.
The April average price in Southern California was -$13/MWh, this year’s was +$21.58/MWh, and the 2023 price was +$59.86/MWh.
Tags: Negative gas electricity prices states
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