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Featured Commentary

(Originally posted on Ansergy – Mar 30, 2017)

Black And Blue

Good Morning,The Mid-C cash has found a new reality – single digits, the sign of BPA’s capitulation. In fact, that big brute is now drafting GCL despite much flooding on the very lowest part of the Columbia. It is evident to us that they anticipate a deeper draft than the 1235′ and most likely we’ll see Lake Roosevelt pulled to 1220′. All of which suggests there may not be much cash relief at Mid-C in the foreseeable future.  The short trade (and its derivatives) has run its course; now our eyes look towards buying and timing opportunities.

Demand

Weather is warm in the south and mild in the north which is somewhat bullish in the former and very much bearish in the latter.

One day, out about 10 ten days, Phoenix spikes to 96, a genuinely warm and bullish day, but it’s so far out in the forecast we stand a better chance of seeing Trump cancel his twitter account than that weather be realized.

We need to add a sixth city to the California weather; I’m leaning towards Bakersfield. California is warm, not hot; loads may trickle up, they won’t explode. What will happen, with this general warming, is the snow will melt faster than it has of late, though we doubt that matters much as nearly every hydro plant in CA is at hydraulic capacity.

Weather is expected to be slightly below normal in the load centers and slightly above average in the hydro producing regions. Call that a mixed bag, maybe you get an extra 500 aMW of I-5 new load and another 100 kcfs flowing past Longview, WA. New water, incremental flows, don’t matter much since most plants in the Northwest are at capacity.

Loads across the WECC are mostly just ugly, but week on week they are the ugliest at the Mid-C; the Great Basin saw a slight rally, but that bump is easily lost in the Mid-C hydro noise.

Check out the lows at Lake Tahoe – a week straight of below freezing. The low-level snow is melting, but 4000′ and up is not. Palm Springs basked in the low 90s, higher than Phoenix. Kalispell had a string of nights over freezing; it’s not hot but warm enough to continue melting snow. More on that interesting subject in the Hydro section.

Hydro

The Northwest is projected to have another wet week, and even NP15 gets douched.

It has been a while since we’ve seen Northern Cal get more than an inch, this isn’t one of those epic dam-busting storms, just more hydro pain in a region that already has plenty of that.

The 1.5″ at Boise caught our eye, most of that is coming from the NP15 system. Also worthy of acknowledgment is the near 1″ at Kalispell, which is 2X more than normal. The hydro producing regions are expected to receive nearly as much rain as the load centers which is really good news since I live in the load center and we’ve grown incredibly weary of the relentless WY17 rain.

Several of the rivers in the Golden State have realized dramatic drops – all of those are a result of the state’s cooler weather which is changing to warmer. Those drops will be replaced by rallies as things return to normal, or even above normal.

BC is a tale of two rivers. The Kootenai at Ft. Steele has fallen off of a cliff while the Cheakamus rallied. The warming trend in the Rockies should get the Kootenai fired back up, and the BC Cascades are set to explode, as are the rivers in the US Cascades.

The Spokane, Salmon, and Deschutes have all dropped over the last week while the Wenatchee and Skagit are rallying. The latter two are WA Cascade basins and are sitting on massive amounts of snow. The Wenatchee is a member of our Sideflow Index for the Mid-Columbia basins, take a look at how this index typically behaves during runoff:

We use this index as a “runoff” barometer; when it crests so has the Mid-C runoff. It is barely registering; last year it peaked in April which rendered those delicious May LL buys for the patient trader. The long side will become the next great trade at Mid-C, it is just a matter of when and where. One big difference between this and last year are the SWE volumes; the current year is substantially bigger than last. That probably means larger peak runoff which lasts longer, and is also delayed. Delayed because of the Ice Chest Factor – the more snow cover, the slower the melt; rocks and branches retain heat, snow not so much. So the more ground exposure, the faster the melt, there is a lot of snow on the hills which suggests a slower melt.

The Northwest regulated projects are not being regulated anymore, Coulee is a case in point.

That project looks more like the Cosumnes in California than the largest storage project in the USA. Run of River as Coulee runs the MdiC price into the muddy ground. How often have you seen such a shapeless curve as the above? Also, note the 40kcfs spill – hopefully they turn on that laser light show, must be quite a sight.

And BPA woke up to the fact it is a pretty big water year; now they are drafting Coulee, Hungry Horse, and Libby. I guess keeping gas on the margin is no longer on the agenda. We suspect the Feds will continue to pull down Coulee all through April as they now realize a 1220′ reservoir target is necessary.

We love this USGS map; it is an instantaneous summary of 100s of stations across the USA, this is the western version. Black is at record-level, green is normal, brown/red dry. The Northwest is black and blue, the northwest prices are black and blue, too; and anyone foolish enough to carry length into this veritable meltdown is looking at their book and seeing red everywhere and is probably feeling black and blue. We’re glad we were short, we see black, but it’s in our PNL.

Before leaving Hydro, we’d like to take a look at snow as in Inches of Snow Water Equivalent (SWE). Most of the northwest enjoyed a build, week on week, which is why many of the rivers above Coulee saw declines in stream flows. Big water year, right?

Not really, its big on the west side where it doesn’t’ really matter, but in the meat of the production it is just another solid water year. Take a gander at this  NRCS map:

Big on the west side, big on the Snake, and kind of big on the Flathead, but not that big anywhere else. Contrast SWE with PRE:

Wet everywhere, way more prominent pre-wise than swe. Someone asked why our water supply #s were lower than the RFCs:

We suspect they have a larger bias towards pre than we, not sure on that.

TransGen

Noms are a bore; not much is going on in the land of thermal. So are outages:

SP has a slight uptick while ZP and NP are nearly non-existent; Transmission flows are a snoozer too:

The Mid-C will sell power to anyone; we think if Putin offered to buy a few Gigs Trump would sign off on it.

Nat Gas (Futures) has been on a roll of late:

Up nearly $0.50 in a month, but we sure don’t see that in the WECC spot markets:

PG&E Citygate is up a miserly $0.14, not a hub comes close to the Nymex. All of which is indicate of how bearish WECC is at the moment. That too shall pass, some day.

Conclusions

  • April
    • Light load at Palo and SP have been destroyed, forget Mid-C, its so low not worth the VAR
      • SP -short on:off
      • PV -short on:off; the nuke is coming down soon
      • Mid-C – hard to buy MidC on peak, even with the selloff; water is increasing, loads are either sideways or falling
        • SHORT
  • May
      • Similar sell-offs in the LL
        • MidC – short the On:OFF
        • Let’s look at rolls in the south:
          • Contract highs in both PV and SP for the May-April
            • FADE, long APril, short May
  • June
      • Short the SP:PV at negative; the nuke will be back, maybe the hydro inside SP will abate by then (maybe not, too).