April 29, 2013 / 11:41 PM / in 5 years

UPDATE 1-California nuclear shutdown offset low 2012 natgas prices

* California more reliant on natural gas generation

* State power consumption rises, highest since 2008

* Report says grid congestion costs up significantly

HOUSTON, April 29 (Reuters) - Wholesale power prices per megawatt-hour in California dipped just 2 percent last year, barely reflecting a 30 percent drop in average natural gas prices as the absence of two Southern California nuclear units, less hydro power and more demand kept prices up, the state electric grid agency said in a report on Monday.

The average wholesale cost in California’s $8.4 billion power market last year was $35.69 per megawatt-hour, down 2.2 percent from $36.48 in 2011.

However, the 2012 price was actually much higher than in 2011 if gas prices were assumed to have been equal in both years. Adjusted for gas prices, California wholesale electric prices jumped 28 percent in 2012 to about $42 per MWh from $33 MWh in the prior year, said the annual report from the ISO’s Department of Market Monitoring.

“We saw higher average and peak summer loads, lower in-state hydroelectric generation, outages of 2,000 MW at the (San Onofre nuclear station) and increased congestion within the ISO,” said Keith Collins, a manager with the ISO’s market monitor. “All these factors had the effect of increasing electric prices.”

California power consumption rose 2.9 percent last year to 234,900 gigawatt-hours from 2011, the highest since 2008 because of warmer weather and a recovering economy, the report said.

The 2,150-megawatt San Onofre nuclear station, halfway between Los Angeles and San Diego, has been shut since January 2012 following the discovery of a serious problem with accelerated degradation of tubes in the units’ new steam generators.

Operator Southern California Edison, a unit of Edison International, has requested that the U.S. Nuclear Regulatory Commission amend the San Onofre Unit 2 license so it can restart this summer at a reduced operating level of about 750 MW.

The reactor can only restart if the NRC deems the unit can operate safely.

Loss of San Onofre’s output has strained southern California’s power grid and the ISO has said it is planning for a second summer without any of the plant’s output.

Without San Onofre’s 2,100 MW, the state relied on more expensive natural gas-fired generation, said Eric Hildebrandt, chief economist for the market monitor, one factor in the overall increase seen in 2012’s wholesale prices.

In addition, the California grid saw “significantly” increased congestion costs last year, the result of the prolonged San Onofre outage and new reliability constraints, the report said.

Congestion drove real-time market revenue imbalance charges to $186 million last year, up more than 500 percent from the $28 million seen in 2011, the market monitor said.

“We saw congestion all over the system,” Collins said.

Some specific grid constraints drove prices higher in Northern California, while sending prices lower in the southern half of the state. Other constraints only affected Southern California or just the San Diego area, he added.

The San Onofre outage, combined with high demand, also created grid congestion, Hildebrandt said.

When power imports moving into Southern California reached the limits of what existing transmission lines could carry, prices would rise in the southern half of the state. Congestion would also occur on Path 26, the large transmission route for power from Northern California, he said.

When congestion occurred on Path 26, prices in the southern half of the state would rise and prices in the northern half would fall because power could not move out of the region.

Renewable power’s share of the state’s power supply grew to 5 percent in 2102, up from 3.9 percent in 2011. About 700 MW of new renewable generation was added in 2012 and 1,300 MW of new natural gas-fired generation, the report said.

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