Conoco, Mercuria Cashed In on Power Trades During Heat Wave
Conoco, Mercuria Cashed In on Power Trades During West Heatwave
(Bloomberg) -- The August heat wave that scorched the U.S. West and triggered blackouts in California appears to have been lucrative for some commodity traders playing the region’s power market.
Mercuria Energy America LLC, ConocoPhillips, Royal Dutch Shell PLC, Tenaska Power Services Co. and Berkshire Hathaway’s PacifiCorp utility were among traders who sold power above $1,000 a megawatt-hour, the price cap set in the Western Electric Coordination Council, which oversees the regional energy market. Together they made at least 40 sales, according to filings they submitted to the Federal Energy Regulatory Commission Wednesday.
In some cases, the sales called for exporting electricity from California at a time when supplies there were already scarce. Some of those exports were curtailed by authorities.
The disclosures come as California regulators dissect the causes behind the state’s first rolling blackouts since the 2001 energy crisis. During the heat wave, electricity prices skyrocketed as grid operators struggled to meet rising demand and as power plants tripped offline. State officials on Tuesday said that flaws in the state’s power markets contributed to the outages.
In their filings, the traders said the extreme conditions justified the sales. They also said there were no signs of market manipulation, such as megawatt laundering or gaming strategies, in their trades. Finally, they all noticed prices rose to at least $1,600 a megawatt-hour at the Palo Verde hub in Arizona, with some of them citing financial contracts on the Intercontinental Exchange, according to the filings.
Tenaska said in a statement that the unprecedented heat wave drove prices above $1,000 a megawatt-hour for two days and that it complied with rules requiring it to explain to regulators why its sales above the price cap were justified. Mercuria and PacifiCorp didn’t immediately respond to requests for comment sent outside normal business hours. Conoco didn’t have an immediate comment. Shell declined to comment.
More on the transactions:
- Mercuria made seven spot sales to DTE Energy Trading Inc. and two each to Uniper Global Commodities North America LLC and Conoco.
- Tenaska made six spot sales which included some exports. Those were curtailed by California’s grid operator on Aug. 18. The trader said it faced significant losses if its own suppliers failed to deliver.
- Shell did 13 bilateral spot sales on Aug. 18 and 19 above $1,000 at Mead, Palo Verde, Four Corners and Mona.
- Berkshire Hathaway’s PacifiCorp said it was a price taker on seven transactions that were priced above cap, citing the higher prices that settled on the Intercontinental Exchange contracts.
- Conoco made spot transactions at Palo Verde and the Mead delivery point in Nevada. On Aug. 18, one of its scheduled deliveries was cut for three hours because of a transmission curtailment. Discussions about potential damages between it and two parties are ongoing.
- Exelon Corp. identified a single transaction that came in above the cap, which took place after being asked by a broker to help execute a transaction as a credit-worthy counterparty. The day-ahead sale involved 14 megawatts from Rainbow Energy Marketing Corp. to a unit of Citigroup Inc. to be delivered at the Palo Verde hub on Aug. 19. Exelon made a $112 profit on that trade through a fee. Exelon didn’t immediately respond to a request for comment sent outside normal business hours.
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