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The September natural-gas wholesale contract settled below the psychologically important $4 level for the first time since March on a decline triggered by yesterday’s EIA weekly inventory data which came out at a surprising injection of 44 bcf which was about 7 bcf above expectations. With this week’s 44Bcf, the year-on-year deficit is now down to 186Bcf. Entering August, it is highly likely for the deficit to narrow at a pace of more than 10Bcf per week, leaving the end of season storage balance with a below 150Bcf deficit at the end of August. The wholesale contract ended lower as well on the larger-than-expected storage build, but natural gas faced additional pressure as other markets saw losses on concerns about global economic growth. It seems that if the economy is going to slow down as being forecasted by the financial markets then natural gas which is primarily a feedstock for industrial and commercial companies will undergo a price correction as well as we evidenced back in 2008.
In the lone star state this week, the heat wave this week has caused record electricity demand in Texas, prompting authorities to buy energy from Mexico and ask customers to conserve energy. Texans set electricity demand records Monday, Tuesday and Wednesday. On Wednesday, Texans used 68,294 megawatts of power during peak hours, higher than last year's record of 65,776 megawatts. “The Texas electricity grid can only support about 68,000 megawatts at a time”, said Kent Saathoff, vice president of system planning and grid operations for the Electric Reliability Council of Texas (ERCOT).
On Thursday, continued extreme heat and soaring power demand forced the Texas power grid operator to impose rolling outages in the afternoon to prevent a wider blackout as residents struggle with a record-breaking heat wave. The Electric Reliability Council of Texas, ERCOT, moved to curtail power to some industrial customers as a way to boost surplus power to keep residential air conditioners running over the hottest part of the afternoon. Under rolling outages, power is cut to small areas for periods of 45 minutes or so, and then power is restarted. The possible shutdown of a large power plant may have reduced the state's available supply compared to the previous day when the grid operator was able to narrowly avoid cutting power to so-called "interruptible" customers. Interruptible customers are mostly large industrial plants, such as chemical plants, that are paid to be dropped to provide extra capacity for the remaining customers, ERCOT said. On the residential front, ERCOT is recommending that consumers can shut off unnecessary lights and electrical appliances between 3 and 7 p.m., putting off doing laundry or running the dishwasher until after peak hours, avoid opening refrigerators and freezers and running the air conditioning at 78 degrees or higher.
On the EPA front this week, this year’s emissions policy that was produced by the EPA has caused Senator Lisa Murkowski, R-Alaska to ask questions about the reliability impact of potentially shutting down coal plants ability to produce into the nation’s power grid. Sen. Lisa Murkowski, R-Alaska, said she remains concerned about the impacts that new regulations by the Environmental Protection Agency could have on the reliability of the nation's power grid. In May, Murkowski asked the Federal Energy Regulatory Commission, which is responsible for reliability, to explain how the commission is working to ensure that EPA's new regulations do not adversely affect reliability. FERC's responses, which arrived Monday in the form of three separate letters from different members of the commission, prompted the following response from Murkowski:, “In May, I sent a letter to FERC seeking to clarify its collaboration with EPA on regulations that could force the shutdown of a significant portion of the nation's coal-fired electricity fleet”. “I asked a number of questions to determine whether the commission was doing its part to monitor and protect electric reliability in this turbulent regulatory landscape”. “Having received FERC's responses this week, I must say that I am now less confident of that being the case”. On the potential impact on the nation’s power grid, the commission's staff has preliminarily estimated that up to 81 gigawatts of existing generation are 'likely' or 'very likely' to be retired as a consequence of new EPA rules. That's nearly 8 percent of our installed capacity for electric generation and a retirement at that scale could have drastic consequences for many parts of our country. So it seems this story is still being written as folks ask questions and various stakeholders’ voice their opinions on this matter through lobbyist’s or senators.
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