TransAlta bemoans northwest US power price drop

The northwest US has abundant hydropower resources, rising wind generation and legacy coal plants but power producer TransAlta is singling out declining natural gas prices as a key reason for pressured wholesale power prices in the region.

"In the Pacific northwest, we are seeing a downside pressure in [power] pricing because of low gas prices," chief executive Dawn Farrell said this week on an earnings call. "Over the longer term that market really does rely on gas pricing to set the marginal cost of power."

"As long as gas prices remain lower than expected, we do not expect to see much of an increase in pricing, at least over the next year or two," she said.

Peak mid-Columbia day-ahead prices so far this year have averaged about $20/MWh, down by almost half from the same period last year. Daily spot natural gas prices at Northwest Sumas are down by 44pc year over year, to $2.34/mmBtu.

Peak mid-Columbia assessments average $26/MWh for January-April 2016 and $29/MWh for January-April 2017. Forward curves at Sumas average about $2.80/mmBtu for January-April 2016 and $3/mmBtu for January-April 2017.

TransAlta owns hydropower dams in British Columbia and a wind farm in Wyoming. But its principal generation asset in the northwest US is the 1,340MW Centralia coal plant in Washington State.

The northwest US has faced relatively flat load in recent years because of slow economic recovery after the 2008-09 slump. But "there has been some demand pickup in the region for the first time in 2008, and certainly we are hearing about that as we are in the region," Farrell said.

Hydropower and coal plant owners have not benefited from the increase in load because of the parallel rise in installed wind capacity. "The renewable assets themselves are offsetting any impact that you would get from demand. So for now, we see a little bit of upside here in the summer, but not a lot of growth in at least the next year or two," Farrell said.

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