Was Gas to Blame? Exploring the Cause of California's High Prices

Deck: 
Basis exploded, but so did heat rates and NO<sub>x </sub>credits.
Fortnightly Magazine - February 15 2001
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Recharge the Economy with Renewable Energy Tax Credits

1 "Staff Report to the Federal Energy Regulatory Commission on Western Markets and the Causes of the Summer 2000 Price Abnormalities," Nov. 1, 2000. Available on FERC website, www.ferc.gov. Hereinafter cited as Ferc Staff Report on California.

2 Source: Energy Security Analysis Inc. power databases using EIA form F900 and F759 data.

3 Price data for this analysis were the real-time market in NEPOOL and PJM (up to June 1, 2000; thereafter, the PJM prices are from the day-ahead market), and the day-ahead prices for 59th Street Station in New York. 59th Street Station and SP-15 prices (rather the reference bus price) were used because the reference bus prices are not traded. Spark spreads were calculated using the hourly prices and the Henry Hub spot price for natural gas. Significantly different results would obtain if we used Transco Zone 6 prices, which incorporate transportation costs to the East Coast and thus reflect local circumstances better. But Henry Hub has the advantage of being a liquid market and has a price for gas that everyone can agree on.

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