Market Commentary

Good Morning,

One thing jumps out this morning – a cut in the NWRFC 10 day forecast:

This cut showed up yesterday and I will be watching today’s (noonish eastern time) for confirmation.  The change, 500 aMW to 1000 aMW, is material and extends across the 10 day horizon – and also departs from Monday’s STP forecast.   Apparently BPA does not need the water and perhaps this change simply reflects their plans for next week.  GCL has been passing inflows and doing a small draft this week:

No change in weather outlooks, mild in the northwest and significant cooling the south.  I’ll update this post after today’s 10 day is posted.

Good Morning,

Not much to report on Mid-C … the weather in Seattle is stunningly beautiful.  Not too hot, not too cold, perfect for golf and awful for loads.  Down south its a bit more interesting.  Temperatures have clocked in at the high 90s, low 100s in the LA basin.  What did loads do?

A decent rally, up about 5k MW versus one week ago, but off nearly 10k from the peak on Sep 8.  Looking forward we are not seeing any more big heat, and from above, it don’t really help that much:

But the big news is the DC derate (and the AC to a lesser extent), so what does that do to our forecast?  First let’s look at the transmission flows:

Then the heat rate forecast:

The current heat wave certainly rallied the market … but the cuts in the DC have little impact on SP, mostly because demand falls harder than the lost northwest energy:

Peak demand will fall 5000 MWs, absent another heat wave – a heat wave not currently in the cards.   With actual flows into SP (from the DC) of about 1500 aMW a case can easily be made that the DC cut, at least in SP, is a non-event.

So what is my point you might ask.  Simple, don’t expect to get any SP-based love (bullish) on your long SP-MidC Oct, you’ll need it all from Mid-C (bearish), which I don’t see happening.  First let’s look at the spread:

All I see is a widening delta between the forecast and market.  Given we don’t see SP getting more bullish it must be that the bears see more Mid-C pain.  Are they right?  It’s a tale of two curves:

One curve (Mid-C) has the market pushing price beneath our forecast (a no no) and the other curve (SP) has kept the deltas consistently wide.  Either Ansergy is really good at forecasting Mid-C, and really bad at SP, or something’s gotta give.  I think SP is over-priced and Mid-C slightly under-priced, especially when we look at the price inflections:

I see a lot of upside for Mid-C and a lot more downside for SP.  I’ve said my piece, it’s your money, but put me down for being short biased for the Oct SP-MidC on peak … the off peak I’m even more bearish, so is our Opp Matrix (this is a machine-based ranking of all traded products using internal weightings – if you want to learn more contact me):

The top plot displays the model’s execution bias, or its sentiment.  Note that it began by being very bearish in late June and as the market crushed itself the sentiment morphed to “Hold”.  Now the market has re-rallied and the sentiment has returned to very bearish.   The Onpeak spread is similar, though less convicted:The sentiment was a strong buy a week or so before the market soared $4.00; post that rally the forecast has slipped and the delta has widened …teeing itself up for a possible correction.

Greetings,

We have made a material changes to the model:

1. Water Year Ending 2016 is now being computed using only El Nino Years; all other water years (2017) will use all years.  The following table shows the anomalies by Ansergy Hydro Basin:

Once we begin using snowpack anomalies to forecast balance of WY16 the future precip/snow anomalies will use an average of all El Nino years  pre/swe for that basin.  I added this to the model yesterday and current price forecasts now reflect the change.  The following chart  summarizes the price changes:

Most of the price change beyond December is caused by the switch to El Nino years (some may be due to a change in gas price).   We will rerun all of our historical forecasts to reflect this change.

Good Morning,

Nothing much to report on the STP – the price impact on the forecast of yesterday’s minor changes is immaterial – I’ll pass on posting a non-event.  That said there is, however, some interesting things developing down south, way down south in the LA basin – like very hot temperatures.  Burbank may set a six year high on Sep 25, and equally interesting is the change in temperature forecast versus a few days back:

Or at least get close to that high – the following plot was pulled from the Historical Temperature report:

There appears to be a trend in very warm Socal temps of late – the forecast is predicting Burbank and Phoenix to enjoy nearly  equal temperatures – low 100s.  Should this continue, through BOM expiry, the event will bode bullish for the Oct SP-MidC.  The event is mostly limited to SP15 as San Jose temps are forecast in the high 80s, and only for a day:

With the approaching DC derate (to 0) things could get interesting …

And the AC TTC (20 day BPA forecast) is showing some volatility of late:

It appears that the lines capacity has been upgraded by about 1000 aMW for the next few days …. just in time to serve that new SP load.  Clearly its all about SP load for the next few days (weeks).

 

STP Update – Sep 21

Good Morning,

After an initial “fail” the NWRFC capably published a full 120 day forecast late yesterday afternoon.   The only excitement in this release was the fail, now that it has been rectified there but a long collective yawn over the data.   Let’s begin with the monthly energy:

A relatively uneventful update except for the 300 aMW increase in energy in Sep; Oct suffered a very minor 170 aMW haircut – notable as the previous four forecasts had raised energy in October.   Nov-Jan were relatively unchanged ….as they should be; no one knows anything that far out, at least pre-commencement of the new water year.  The daily plot reveals modest additional color:

BOM will receive more energy, as it has for the last five forecasts, while Oct is pretty much neutral, aside from the RFC providing some intra-week shaping, something they seem to randomly throw into the STP about every third or fourth week, then take it out the following week.  November gets more water in the first half and then has an equal amount cut in the back end to average to “no change”.

The conclusions to be drawn are few other than the water for the next four weeks is pretty much locked in – the last four forecasts have not varied much, however the age of stable STP forecasts is winding to an end as we approach the new water year.  On an aside, the latest weekly El Nino Index (SST34) posted a 2.3 for the week ending 9/16; the biggest El Nino on record, the 97-98 event, posted a 2.2 for the same week ending.  Clearly this is going to be a big one – have you checked out our El Nino research?

STP Update – Sep 21

Good Morning,

After an initial “fail” the NWRFC capably published a full 120 day forecast late yesterday afternoon.   The only excitement in this release was the fail, now that it has been rectified there but a long collective yawn over the data.   Let’s begin with the monthly energy:

A relatively uneventful update except for the 300 aMW increase in energy in Sep; Oct suffered a very minor 170 aMW haircut – notable as the previous four forecasts had raised energy in October.   Nov-Jan were relatively unchanged ….as they should be; no one knows anything that far out, at least pre-commencement of the new water year.  The daily plot reveals modest additional color:

BOM will receive more energy, as it has for the last five forecasts, while Oct is pretty much neutral, aside from the RFC providing some intra-week shaping, something they seem to randomly throw into the STP about every third or fourth week, then take it out the following week.  November gets more water in the first half and then has an equal amount cut in the back end to average to “no change”.

The conclusions to be drawn are few other than the water for the next four weeks is pretty much locked in – the last four forecasts have not varied much, however the age of stable STP forecasts is winding to an end as we approach the new water year.  On an aside, the latest weekly El Nino Index (SST34) posted a 2.3 for the week ending 9/16; the biggest El Nino on record, the 97-98 event, posted a 2.2 for the same week ending.  Clearly this is going to be a big one – have you checked out our El Nino research?

It’s official …. Summer is over, at least for the northwest, but  The LA basin looks to enjoy another heat wave this week:

That is nearly 8 degrees warmer than where we left things off at on Friday.  I had suggested coming out of the Oct SP-MidC length last week, in light of where cash may trade this week you might want to hold on to that length, or hold off on shorting, as cash may support those positions:

The forecast is ticking up, the market is topped out, but wouldn’t be surprised to see it rally in sympathy with late week cash – though that would be an opportunity to sell (see below).  Northwest loads are sideways to off a touch from a week ago:

While the heat is already driving Cal loads up nearly 5000 mw on peak:

Today is the weekly NWRFC STP release and most likely there will be something interesting to discuss.  Looking at today’s 10 day forecast (RFC) we might divine some indication as to its direction:

For starters, they cut flows in the first day by 500 aMW but in the back end they increased by a few hundred MW … increased over last week’s STP.  Reading these entrails might lead one to conclude that today’s STP will be bearish …. me thinks so.

The Ansergy Mid-C cash forecast continues to fall, as does nat gas:

while the SP holds its own despite fall gas prices:

 

Note the cash spread for this week is $10-12 but note even the forecasted crash at SP following this heat wave … a crash driven by a return to climatology.  The Mid-C, however, actually sees demand climb for some hours as heating loads continue to build:

Which further underscores by belief that the Oct SP-MidC at $11-12 is over-bought and the correction will continue as the market sells the fact of the So Cal heat wave.  Speaking of Oct Mid-C …  I like it … like like owning it:

Not because there is anything particulary bullish about Oct Mid-C, more because the market has crushed it over the last 6 weeks and it is now trading beneath our forecast.   I also like owning the virtual Powerex Put – if they ever quit selling the Mid-C will enjoy a 2-3kmw net demand rally … if they don’t  you pretty much get what you see today … maybe a bit better prices with some early cold.

Good Morning,

Still pondering last week’s “heat wave” and it’s minimal impact upon loads in the northwest( BPA+BC Hydro + Puget Area):

A different story in California, the incremental peak  was over 14,000 MW:

Goes to show that summer is over in the northwest but not down south.    The flip side of this seasonal cooling is the northwest is already seeing some heating load and will see more this week with Portland night time temperatures dropping into mid-40s:

The NWRFC added some more water to BOM in its latest 10 day forecasts in comparison to Monday’s STP – about 500 aMW beginning on Sep 21 – possibly bodes for another bearish STP on Monday …watch today’s 10 day for  confirmation.

Speaking of hydro, BPA continues to refill Coulee which is now at 1282:

Given soft prices and re-filling reservoirs its hard to get bullish about BOM, or even Oct, especially given the resurgence of recent wind energy:

Adding to the bearish cash woes is BC Hydro’s continued relentless selling into the Mid-C:

Relentless as they are on pace to make 2015 a record year for exporting energy.  Be interesting to see what they do when the lines are cut in October … I have to think they will become buyers, but we’ll see.  The Ansergy hourly price forecast has taking a beating from the loss of load, increases in hydro, and a falling gas price.

All of this is also making some northwest utilities a lot longer than they were a few weeks back, Seattle City Light, for example:

Apparently the market agrees with Ansergy as it has pummeled October into submission …and past our forecast for the first time!

They say everything is a buy …at a price …and despite all of the bearish sentiment above … put me on record that I’d be covering Oct Shorts and going long ….this is an over-sold market that is due for a $2-4 snapback.

Same sentiment with the Oct SP-MidC …. over done and I’d sell it, though if given a choice of going long Oct Mid-C or short the Oct SP-MidC I’d be long Mid-C:

Look at that gap… a new record…hence my fade.  Same feelings toward the Q4 SP-MidC but you’ll have to take it into the Q to get paid.

Greetings,

We at Ansergy believe in continuous improvement and are constantly seeking better ways to display our data/forecasts. As we make these changes we will update our users in the blog. This week we made several changes which are itemized below. We encourage our clients to submit suggestions of their own.

Changes Effective Sep 17

• WECC Totals added to Dispatch Forecasts. Each of the three forecast types (hourly, daily, and monthly) have been aggregated into “WECC”. Most items are summed (Demand, Hydro, Gas Burn, etc); some are load-weighted averages (Power Price, Heat Rate, Reserve Margins) and transmission is aggregated by taking the Max Value which will reflect the loading from the sending hub’s perspective.

 

• Nuclear Status Report. This report shows the daily NRC status for the last 90 days; the existing NRC report displays the Ansergy refuel forecast for the next two years.

 

• ICE Settle Backcast Reports. We have included two reports: Daily and Monthly. The daily compares the Ansergy daily forecast across time against the ICE settle for that day. The monthly compares both the Forward Market price and the Ansergy Forecast price to the average of the ICE settle for that month.

 

• More Weather Stations. In light of the approaching water year we have added three new stations: Kalispell, MT; South Lake Tahoe, CA; Pendleton, OR. Each of these helps cast light on precipitation/snow in the remote mountains

 

• Actual Loads. Puget Area Loads (from BPA Oasis) has been added to the Current Loads report; we will be adding three more later this week: Pac East; Pac West; and Nevada Power

 

• Utility-Level Forecasts. We are now publishing hourly load, hydro, and wind forecasts by control area. The data can be viewed as absolutes or as changes from today and can be useful for identifying which utilities are getting longer/shorter; in a fashion these reports act as dynamic L&R summaries. Later this week we will be adding two more reports to this group: Daily and Monthly L&Rs.