Market Commentary

Good Afternoon,

As expected the River Forecast Center has slashed flows across the Mid-C; let’s start by looking at the month on month changes:

This recent forecast is a material departure from the last five weeks with cuts across all reported periods, the smallest being in November with just 500 aMW pared from last week’s forecast.  The biggest drop was in Feb (it’s only out through the 9th of the month) with a 750 aMW dip week on week, but note that it is a 1500 aMW cut from two weeks ago.

The change should come as no surprise, the tea leaves were easy to read, we’ve been preaching a restatement of Nov for weeks.  What is surprising to me is that more cuts are being taken in the back end, where demand is greater, than in November.   The daily plot of energy illustrates this point:

Look at that chart – does it strike you as strange that the RFC could miss so far, so wide, so often on something that was obvious to everyone else.  It’s like someone just flushed the Mid-C toilette and 10% of our water is gone.  Well the toilette had been flushed last summer and now the shell game of stacking water in the  back end appear to have ended, though we believe more cuts are to come.  Check out the year on year plot:

Now this looks more reasonable, but I still have issues with the chart.  At least 2015 is projected to be lower than the last three years, good job, but I don’t like the Nov/Dec shape.  Look at past years, Dec over; look at this year, Nov over.  If I was a betting man, and I once was, I’d say that the final shape will be Nov under Dec and all three months (Nov-Jan) cut another 500 aMW, maybe 1000 aMW in Nov.

That should make Mid-C go bid, in fact it already has from a heat rate perspective:

Wisely so, since this most recent STP is going to put additional upward pressure on Nov-Jan, probably on the whole curve.

Happy Trading,

 

Mike

Good Morning,

I am seeing a slight uptick in NW loads:

Comparing week on week, Saturday to Saturday, there is a 500 aMW bump; looking two weeks back the increase is 700 aMW; since this is just a subset of the total population we can project that the increase to the Mid-C is closer to 1000, perhaps 1500 aMW.  Given that temperatures have been notably cooler we can also attribute all of this load change to HDDs.

California remains mired in the inevitable slide into bearish winter conditions though the LA Basin is clinging to summer like temps, though those are soon to wane:

Loads have fallen precipitously,

yet there is more shedding to be had at both NP and SP:

Note that the NP trough is short lived as it realizes a slight bump from heating loads while SP realizes no change until April.  The Mid-C, on the other hand, is ready to burn up the electrons to meet just normal winter demand:

But forget loads, that isn’t the story of the day … .the story of the day is about water, water that was there last week, gone this week.  Oh my, I was right, the RFC has begun shearing November back to reality:

Don’t bother cleaning your glasses that big black line, standing so tall about the blues, is the STP forecast from last week.  Yes, that is a 2,000 MW cut from the STP for the same days.  Were I to venture a guess, and I have been venturing this guess for the last six weeks, those forecast cuts in the RFC 10 day will make their way into today’s STP.  Where BPA’s slice customers (and BPA) thought themselves long perhaps tonight they will find themselves less long, perhaps even short, and to the bid they will march.  Mark me as more bullish Nov than I was last week.

Adding tinder to the fire, reservoirs are still below normal:

Though by looking at current conditions, GCL for example, you might think things were just fine:

BPA is filling which is never bullish but they are still a few feet behind where they have been in the last five years.    Renewable s also cast a slightly bullish outlook to the story:

Though wind and solar can change overnight and wind probably will given the recent stormy west coast weather.  It’s still an El Nino year and the RFC apparently concurs as they are modeling a 90% water year for TDA:

We agree with them (current Nino 34 is 2.5 vs same week in 1997 of 2.6 …its gonna be a big one) though Ansergy may restate its hydro forecast for WY16 this week.  In early September we began forecasting the new water year using El Nino years but in hindsight we would rather let the water year play out through our model and will be switching back to a pure snow-driven forecast.  More on that later this week.

Two nukes are down (one in PV, one in NP) and scheduled to come back in Nov:

As for the market, and my sentiments, I’ll hold off until tomorrow post-STP update.

Enjoy your day,

Mike

 

 

 

 

Good Morning,

ISO loads are tanking while the Northwest’s are trending unchanged:

Looking out the LA basin remains warm, the projected cooling has been displaced with more heat, let’s call that bullish SP.  The northwest also is a touch warmer, let’s call that bullish Golf:

Note there is also no rain coming to Seattle, meaning no rain falling anywhere in the northwest, call that bullish on both MId-C and golf.  Moving on from demand, the biggest news in today’s fundies are the changes to the RFC’s 10 day:

That, ladies and gentlemen, is about 500 aMW of water the folks in Portland poured onto the bullish fires (if there were any out there).  Perhaps it also portends to a more bearish STP on Monday, but I don’t think so.  My guess is November will be revised downward, probably not a lot, maybe 200-300 aMW down.

That’s all for now, enjoy your weekend.

Cheers,

 

Mike

Good Morning,

Before diving into the market allow me to explain a bit further the issues with website speed.  Apparently Google released an update to Chrome over the weekend that results in the browser lagging due to the frame rate slowing to less than one frame per second.  Chromium (Google’s Chrome team) has been notified of the problem and we assume will soon address the issue.  In the interim Firefox and Safari run the Ansergy website flawlessly and we highly recommend you download a copy of Firefox until this is resolved by Chromium.

Update: The following was posted on Chromium’s bug blog earlier this morning:

#2 [email protected]

I think this is a slimming paint regression where our over-invalidation of non-composited scrollers causes pathological performance due to recomputing a massive clip path. Caching the path-only clipping path as we do for masked clipping should solve this until we use transforms for non-comp scrolling and stop over-invalidating.

I'll put up a quick patch.

To get Firefox click here.

We apologize for the inconvenience and expect Google to resolve this soon.  If you cannot use Firefox the website still  works for Chrome but has slowed down.  When you do run a report just wait a second or two and the page will refresh; do not keep clicking, that won’t speed up the refresh.

Now, on to the market ….

Loads have tanked in the ISO and are sideways in the northwest:

That is a 12k drop in peak ISO loads from one week ago; the northwest utes are just sideways but that is soon to change:

The load spread (SP-MIdC) officially flips around the first of November with Mid-C now the “premium” load hub.  Sounds bullish, huh?  Not really, if we looked at the net energy served by the stacks for both hubs we get less excited:

Mid-C does dig a bit deeper into the stack but not as much as the increase in loads due to the RFC’s projected increase in hydro for November:

That is a 2200 aMW increase in energy over BOM which offsets most of the increase in demand.  But do we really believe that BPA will change its flow regime just because it’s a new month?  Look at the revision trend for October – down, down, down, down, down; then look at the daily STP energy shape:

A haircut for the next week then BAM, 3 gigs of new energy on the first of November.  I cry bullpoop and would suggest that once BOM goes bye bye, and Nov becomes BOM, the recent downward revisions will be extended into November.

There are hints of that coming true in the RFC 10 day forecast – they are pushing the cuts deeper into the backend of their forecast.  On another note, and also bullish for Mid-C, is a slight change in the Northern Intertie loadings:

BC is actually buying on more hours than selling, a first since last spring.   Of course cash doesn’t support much reason to be bullish about Mid-C, or bearish about SP15, but cash never has called a change in trends, only good fundamental outlooks can do that.    I’m still bullish on the Nov Mid-C and neutral on anywhere in the ISO.

Looking a bit further into the curve two trades warrant further comments.  The first is the Q2 SP-MidC:

About a month ago I had suggested that the spread was too wide given El Nino – today I’d suggest it’s time to cover that short after the market has plunged back to an Nino-induced reality.  .  The other trade was the Q3-Q2 Mid-C on peak roll:

This too had been a short recommendation and, like the spread, am now suggesting not only getting out of the short but going long the roll.  Q2 could find itself a touch on the mushy side if California gets the big wet, which it most likely will, even if the northwest is dry.   Q3, on the other hand, should be relatively immune from El Nino.

The downside in length is relatively limited by the constancy of El Nino projections.

Happy Trading,

Mike Griswold

 

 

 

Good Afternoon,

We have a new STP 120 day forecast, effective around 2:00 pm pacific time.  As for that update, not much to say other than the RFC is consistently consistent.

This first plot compares this week’s (10-19) forecast to same week from previous years.  I use this to get a reality check on the forecast and the conclusions I’m drawing is that the govt doesn’t see much change from past years, though reservoirs are below normal.  I think the water is overstated:

 

 

The next plot compares the current STP aggregated into monthly energy (aMW) and compares against the previous five forecasts.  This plot is useful for identifying trends in the RFC’s forecast.  As you can see they have steadily walked October down, each week, yet kept the out months the same.  This further confirms my suspicions that November will eventually be revised downward, perhaps as soon as next week.  Now, on to the dailies ...

 

Very consistent with last week’s forecast in the front with both scheduling large increases in hydro production at the start of November.  Most likely  this is in response to the expected increase in demand from seasonal cooling.   It looks like BPA is preparing for the same as they have been filling Coulee rather aggressively of late:

All in all, it’s a rather “dry” forecast, as is the outlook for precip in the northwest.

 

We have resolved most of the performance issues that some users experienced this morning. If you experience any slowness please notify us at [email protected].

Good Morning,

Weather turns neutral (from bullish) in SP15:

While Mid-C temperatures drop and begin to assume an element of heating load-driven bullishness:

And the rains are returning adding a slightly bearish twist to the drama.  The River Forecast Center seems to concur having added some additional energy to the back end of their 10 day, though they have tempered that additional water somewhat in the last two 10 day forecasts:

The northwest remains longer due to the DC cut:

And BC Hydro hasn’t helped the bullish cause by their aggressive selling of late (the change happened about the same time BPA restored the AC TTC earlier this week):

All of this transmission work has rendered the ISO slightly more bullish:

Though the cuts on the DC have been mitgated by jacking imports from Mead and Palo:

All in all it’s a WYSIWYG world … what we saw this week most likely will extend into next week, but then things start getting more interesting.  The Diablo nuke will be then a week away from returning and the climatological cooler weather in the northwest will be raising loads:

while loads are shedding in the ISO:

Both stacks in November are sitting on bullish inflection points though SP’s stack has equal bearish downside as upside while the MidC’s is more skewed towards bullishness:

render me a mini-MidC bull and neutral on the SP:

The opportunity matrix has swung to a more bullish tone for all products given relatively low market prices.  Some of the other model sentiments for November and December (on peak) are expressed in the tables below:

I see no home runs, just lay down bunts and pop a single here and there and you are bound to push across a few runs over the next several weeks, though the season for home runs is fast approaching as we enter what should be one of the more interesting water years in the last decade, though the latest weekly El Nino indexes are now showing the 97-98 pulling ahead of the 15-16 event (2.6 vs 2.4 as of Oct 7).

Enjoy your weekend,

Mike

Good Afternoon,

To provide further transparancy, and add additional market intel, we have add our generation stacks to the site (Execution Tools – Generation Stacks).  Below is a sample of the chart for Mid-C July 2016 on peak:

The black line is the forecast’s most recently used stack.  All of the other lines are provided as reference points.  The blue line is the current forecast, where it crosses the black line is the amount of non-renewable energy used (on average) for that month.  The dark blue line is the most recent market price for that period and the other horizontal lines are the historical settles beginning in 2010.

Let us know if you find this helpful or have questions. – feedback good, silence neutral.

Mike

Good Afternoon,

The NWRFC has updated their weekly flow forecasts (STP) this afternoon.  Not anything in these numbers that will raise your pulse but still worthy of a brief discussion, beginning with the daily plot:

Consistency seems to the appropriate description of this chart – the water boys are steady and locked into their predictions and not willing to vary, though they did shed a small amount of water out of October:

 

and they put that small drop of water into November, as they have of late, though I struggle to see why.   Perhaps looking at year on year may shed some light:

But alas, no light is shed.  November 2015 is now projected to have more water than either 2014 or 2012, noticeably more robust water years.  Same is true for December, marked now as the biggest flows in the last four years.  I don’t buy it, but apparently the market does, as it has beaten down Mid-C like the ugly red-headed step child that it is.

These new values will be reflected in tomorrow’s forecast.

Cheers

Mike

Good Morning,

Today’s outlook looks rather bland, at least on the surface.  North loads are at the seasonal trough and soon to rally hard while south loads are beginning the long slide into the bearish winter:

Temperature forecasts don’t portend any changes in the north but do bring a general cooling trend to the south:

The Mid-C will remain relatively dry for the next two weeks and the ISO may get a small storm.  The River Forecast concurs as they have materially cut their projected flows in the 10 day suggesting a possible bullish STP for tomorrow (assuming they don’t work on Columbus Day, otherwise the STP arrives this afternoon).

Those are big cuts (as of Friday, don’t think we get an update today) and if they carry through to the next STP it will be construed as bullish BOM.  I have to think that these cuts will carry into the Nov given that they have bloated the prompt with too much water, at least that is my opinion.

This picture just does not seem right.  Why would Nov have more water than Dec or Jan given that the latter has more load than the former and we have a dry 14 day precip forecast?   I’d be more inclined to suggest that at least the first two weeks will look more like Oct, or at a minimum, like Dec.  Either way I believe that Nov will get at least a 1000 MW haircut over the next few weeks.

Speaking of haircuts, check out the Ansergy load forecasts for SP and Mid-C:

Don’t bother cleaning your glasses, the SP15 chart is showing a 6,000 MW drop in loads over the next week or two…contrast that buzzcut with Mid-C’s 6,000 MW rally over the next 8-10 weeks.  No wonder the RFC has jacked flows in November, but where does that water come from if it doesn’t rain?   For the record, and to state the obvious, the cut in SP loads is about 3x greater than the energy loss from the DC.

Naturally reservoirs are refilling given the current bearish fundamentals with Coulee adding about a foot to its forebay elevation over the last week while cutting outflows:

The overall reservoir status has grown slightly more bearish (more water behind the dams) over the last few weeks – note the gap between the previous three years and 2015 narrowed this last week:

To further damping any BOM bullishness the wind blew, blew hard, over the weekend:

So, in sum, a lot of mixed signals in the current fundy outlook.  My take remains bullish on Nov Mid-C (on or off) and slightly bullish on Dec Mid-C; bearish on the Nov spread (either) and slightly bearish on the Dec spread.  Why am I bullish when y’all are surfing the bearish trend?  Because y’all are bearish, that is why.  Trend has never been my friend.