California ISO market monitor says wholesale prices down in 2006

Washington (Platts)--20Apr2007

Wholesale electricity prices in California fell sharply in 2006 from the
previous year largely because of lower natural gas costs and an abundance of
hydro capacity, the Independent System Operator's independent Department of
Market Monitoring said late Thursday in its 2006 Annual Report on Market
Issues and Performance.

The monitor also said that the state grid and power markets performed
well last year, despite a 1-in-57-year heat wave that pushed the state to new
demand records.

The report said the average estimated cost of wholesale power in 2006
fell to $47.55/MWh from $57.83/MWh in 2006. The report said the figure
includes California markets and the estimated cost of bilateral energy
transactions that make up more than 95% of the state's energy needs.

The report also said that total estimated energy and ancillary services
costs fell 16% in 2006 to $11.4 million from $13.6 billion in 2005, while
real-time and reliability costs fells by 24% in 2006.

Further, the report said that for the first time in several years,
California saw a net loss of generating capacity in 2006, largely because of
the closing of the Mohave coal-fired plant in Nevada that was owned by
California utilities and was part of the ISO control area.

The ISO expects the state will return to a net gain in generation in
2007, when some 1,500 MW of capacity is expected to come online and no
retirements scheduled.