Gas Costs Drive Power Prices Higher

Rising natural gas prices are driving up the price of electricity in California, according to the California Independent System Operator.

In a report on the state’s electricity market performance for the second quarter of 2022, CAISO stated that “an increase of more than 100 percent in some natural gas prices compared to the same period in 2021 . . . resulted in higher marginal energy prices across the Western Energy Imbalance Market, including the California ISO.”

To help put a damper on gas prices, the report noted the California Public Utilities Commission authorized Southern California Gas Co. to store more gas at its Aliso Canyon gas storage facility near Los Angeles last November. However, the move was only partially successful in checking gas prices by spring.

At SoCal Citygate the price of gas rose from $3.87/MMBtu in the second quarter of 2021 to $7.59/MMBtu in the second quarter of 2022.

The grid operator’s analysis showed that gas prices statewide during the second quarter of 2022 were up about $4/MMBtu compared to the same period in 2021.

CAISO noted this was a large factor in driving day-ahead electricity market prices up 77 percent, when averaged over the second quarter this year compared to the same quarter last year. The peak day-ahead price in the first quarter was around $60/MWh, but rose to almost $80/MWh in the second quarter this year. Congestion costs between the same two periods rose from $98 million to $269 million and real-time imbalance offset costs went up too from $45 million to $131 million.