CCAs jump 7 pct as nuclear power plant to stay shut

SAN FRANCISCO, June 21 Thu Jun 21, 2012 6:48pm EDT

SAN FRANCISCO, June 21 (Reuters Point Carbon) - California carbon allowances (CCAs) for delivery in 2013 closed at $16.75 per tonne on Thursday, up $1.10 from one week ago on a growing belief that the shutdown of a California nuclear power plant will boost carbon emissions due to higher fossil fuel use.

The bustling carbon market saw 155,000 CCA forwards clear on the IntercontinentalExchange (ICE) this week, with 85,000 of the permits trading on Thursday, the busiest single day for the market since April 20.

A deal for 5,000 CCAs at $17.60 per tonne on Thursday marked the highest price for the benchmark contract since November 14.

Profit-taking quickly brought the price back below $17/tonne, market sources said.

A flurry of $20 call options that cleared on ICE Thursday underlined the market's bullish sentiment, as participants paid premiums of between $2 and $2.50 for the right to purchase a total of 160,000 CCAs next year.

"People are protecting themselves against the price going above $22, which is a very bullish play," one market source said.

Traders and brokers agreed that news that there was no timeline for the restart of the San Onofre nuclear power plant was the primary driver of prices this week.

The plant, which generates 8 percent of the electricity used in the state, has been closed since January when a small radiation leak was discovered.

At a meeting in Orange County in southern California this week, federal regulators investigating the leak described the problem with one of the unit's steam generators as "serious and significant."

Southern California Edison, the plant's operator, could not say when San Onofre would begin producing electricity again, although it has said it will not be back online this summer.

The market is responding to the possibility that the plant could be offline during 2013, the program's first compliance year, sources said.

SCE, an investor-owned utility, has one of the largest compliance obligations under California's future carbon trading program.

Initial reports from an ongoing investigation have pinned the blame on the testing and assembly of the generator, which was made by Mitsubishi Heavy Industries.

No trades were reported this week in the market for Regional Greenhouse Gas Initiative (RGGI) allowances.

The benchmark 2012 contract was bid at $1.92 with an asking price of $1.95 in the over-the-counter market, unchanged from one week ago.

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