Market Commentary

WECC Update – Part Two of Two

Good Morning,

Sometimes it is good to be random; today we are posting on a handful of trades that caught our eye using Ansergy’s APT tool. These were culled by sorting on either Rank or WoW (Week on Week change in Rank). There is no order to the following.

Prompt month Palo Off-peak and it is nearly back to its pre-Sumas levels, not that a Palo bullet should have been impacted by that far-removed gas hub but it appears it did. The heat rate is trading at its one year average, but the power price is still over that same level. Given weak fundies, we’d… SELL

This is the NP On|Off spread for August. Unlike everything else, this has never backed down and has been on a bull run since last March. Though this is NP, you are betting on Socal Citygate having supply problems next summer. You’d buy this if you thought those problems would persist into next summer. Otherwise, this looks like a free short.  The trend of late has been to come off; we’d hop on that train and SELL

If we had a Rank for liquidity this would be close to the last – the Palo|MidC Q1 Offpeak. Not even sure you could find a market on any one of the legs, let alone trade it as a spread.  But this is like Fantasy Football, who cares! This was so cheap a week ago, look how the market has soared towards the more rational forecast. It is low price and heatrate; we’re big BUYERS

Let’s roll into a roll, the SP Aug|Sep in this instance. I love those step functions at a price, it kind of tells on ICE/Platts and how they derive their end of day settlements, right? But let’s assume those market prices are executable and we can conclude the roll is cheapish. It is priced the way it is because of how it settled last year. That is always a mistake to assume last year will be this year. LA is a late bloomer, summer heat-wise, and August has typically more CDDs than July. Last year was the anomaly, so we’d BUY this bad boy.

We’re still rolling with these rolls; this one is the Palo Sep|Aug and it’s too cheap to meter. Huh? This is crazy but just speaks to how the market has bid up the July and August leaving the poor man’s summer in the dust. I’d buy this all day long and hope and pray those Socal pipe monkeys actually fix their problems by July.

This isn’t cheap, the June|May NP roll, but it is starting to slide back to reality. As California’s water year builds the June should grow more bearish, the bet here (if you buy this) is early heat and problems in Socal with its gas. You’re hoping for double-digit citygate prices and SP pulling imports from everywhere. Not sure that is a guarantee, and we like fading anomalies, especially when the trend is in correction mode like it is here. SELL

Same trade as the roll, this is just the June bullet, and it is richly priced – sell it.

BOM NP is cheap, too, both HR and PP. So cheap you should buy? Hold on, cowboy, we didn’t say that. Still, it would be tempting to own this if only weather would support the position, but it doesn’t. Still, what’s the point of shorting something that most likely has little juice left in the tank? I’d buy this just to look busy, doubt you’d lose much.

Here’s another one of those highly liquid opportunities, the Palo October On|Off. Not sure how this made it into the daily screen, there is little to be said and less opportunity. PASS

You need to trade something to keep your job, right? No one wants a trader that doesn’t trade, so here you go, the March SP On|Off. YOu can buy this one for size and own a call option on Burbank HDDs. If it gets cold anytime in the next six weeks, you’ll make $5.00.

WECC Update – Part One of Two

Good Morning,

Let’s start with the weather …

You can’t paint a more bearish picture for the WECC; all the load-center cities are above average in this outlook. Maybe it’s dry?

Maybe not; the storms from earlier this week shifted north, now NOAA has both its mid-term outlooks wet at the MidC and California. Wet and warm, hardly a recipe for a cash rally,  right?

Gas certainly hasn’t; Citygate plummetted about 30%, now its in the lower 5s; check out the Sumas|Stanfield spread, Stanfield is over by $0.20, and Sumas is about to sport a $2.00 handle; wouldn’t be surprised if it tests the $1 handle before spring has sprung.

BOM is bombing, prices extended their slide, and the shorts are getting paid.

Prompt promptly followed bom downward, though appears the curve is starting to flatten out; if only something, fundamentally, was bullish.  I looked, didn’t find it.

Wait, there is something bullish – congestion. Palo is congesting to SP; NP is trading premium to SP on many hours and same at the MidC on either the NOB or COB. But that, congestion, isn’t a measure of bullishness, more a measure of how bearish everywhere is.

Check out those line loadings at Malin500 and the NOB, nearly full every hour. Now the AC’s TTC has been cut; more energy is stranded in the Northwest. Even with cheap energy, exports to Canada are off.

Gas demand has dropped to a warm winter level and will remain there until the forecasts turn blue.

Palo’s power loads fell the hardest of the four traded WECC hubs, but MidC’s weren’t too far behind.

The hourly temperature forecasts beyond the NWS 7-day period are colder than they were three days earlier, but those are not cold.

Here you go, a bullish dashboard. Renewables are off everywhere. Off in the ISO because it rained buckets and solar doesn’t do well when the air is saturated with water; the MidC’s wind production tanked over the last 12 hours.

Yesterday was the first Flood Control release of the year. The Corps used a 95% of normal and had the following target elevations, by the end of April:

A Coulee draft to 1249.9 suggests that drum gate work is viable, should the Corps elect to do so. If they did, the reservoir would need to be pulled to 1255′ by March 15; it is at 1278′ today meaning 80% of the draft would take place between now and March 15 and only 5′ from March 16 to April 30.  I’d suggest that it is bullish for April.

The 95% of normal strikes me as odd given where the NWRFC is forecasting its STP:

You would think we were in a 70% water year, not 95%, after looking at those plots, especially Feb and March.  We believe each is about two gigs light.

What a difference a storm or two can make; check out the moves at SP and NP  in snow anomalies; last week they were in the low 80s/high 70s now each has a 90 handle.

Big rain means big flows;  Shasta discharge is over 40,000 cfs!

So the NWRFC has a very tight 120 day, but their 10-day is radically more bearish than Monday’s STP. With the storms shifted north, don’t be too surprised to see these numbers revised further upward. So much of the Northwest’s precipitation is coming down as rain this year; how much snow will be there to melt in June?

Conclusions

Was a bear, been a bear, still a bear. But bearish is relative to price, so let’s take a look at the market and see if we are so bearish we’d keep on those shorts.

Mid-Week Update

Good morning,

 

NOAA Forecast Images

The West is set to warm up for days 6-14, though Arizona and some of Southern California may be the lone omissions.  The coasts of Washington and Oregon in particular are trending well above normal, and that trend should extend east enough to capture Seattle and Portland in the back-end of the forecast.

Precipitation Forecast

Mid-C continues to show below-normal precipitation, just as we saw in last week’s forecast.  California, especially just west of the Sierra Nevada, may see precip totals well above normal.

LMP Spreads

SP-NP DA showed a $4 difference at its peak for the 8th.  NP jumped well ahead of SP during the early afternoon hours of the 9th.

Futures

Crude continued its patient upward climb after adding another $0.37 yesterday and finishing at $49.97.  That’s more than a $7.00 increase since bottoming out on the 24th.

Meanwhile, gas shed $0.05 and settled at $2.86, though was as low as $2.84 at one point in the day.

WECC Gas Demand

Mid-C had the sharpest day-on-day increase in gas demand at 60,000 MMCF.  SP-15 had a larger nominal increase, however, with 104,000 MMCF added on to the total yesterday.

Gas Storage

Jackson Prairie storage withdrawals were flat yesterday at 128 MMCF and haven’t injected since December 29th.

Total Jackson Prairie storage remains more than 6,000 MMCF above the equivalent date last year.

Hydro

 

PNW Reservoirs

No dramatic changes this week though Hungry Horse moved slightly further below average in terms of elevation.  BC’s Arrow reservoir shows the largest year-on-year difference at just over 16′.

Week-on-Week Snow Anomaly

Low level snowfall was further diminished this past week while we saw moderate gains in higher elevations, especially in NP where the Sierra Nevada stations are reporting near normal levels compared to 50-70% last week.  The Cascades, especially in Oregon, continue to pace below normal.  Southern Idaho particularly stands out with its slow start to the water year.

Snow Depth Summary

Chief Joseph highlighted this week’s snowpack increase with 1.40″ over the previous seven days and 0.85″ over the past three.  Bonneville showed slightly more gains at 1.70″, albeit within a less impactful reservoir basin.

All stations managed increases over the past three days though Wanapum and Flathead lagged behind all other basins with just 0.15″ and 0.29″ recorded respectively.

Snow Depth Chart

A slow start to this week’s snowfall hasn’t helped the Flathead basin when compared to the average, and especially not when compared to last year.  2019 sits more than an inch from normal and two inches from 2018.  Flathead paces ahead of just 2016 and 2017 as of yesterday.

Water Supply Charts

This is a peek at the difference between Ansergy and the RFC water supply estimates.  Grand Coulee Apr-Sep Ansergy and RFC were once on pace to converge, but that is no longer the case.

NP Snowpack Anomaly by Station

Just 9 of the 36 monitored stations are pacing ahead of normal, though 16 remain within 90%.  Quartz Mountain of the Klamath and Little Valley of the Truckee River are the only stations recording more than an inch above normal (1.2″ and 1.15 respectively).

 

Demand

 

Mid-C Demand

Yesterday marked the end of below-normal temps for Seattle as the area paces far above average through the 17th.  This coming week is highlighted by 50-degree temps on the 10th, topping out at 10 degrees above normal.

Portland should see mid-50’s over the 10th and 11th as well, though temps will dip into the high 30’s overnight, while Seattle is projected to stay above 40 for the foreseeable future.

Demand shot up 500 MW across Mid-C as yesterday saw much cooler temps, especially overnight.  Expect loads to fall today as warm weather makes its return.

NP 15 Demand

NP peak demand saw modest day-on-day growth yesterday and remained well above the mark week-on-week (albeit that fell on a holiday).  Overnight loads fell roughly 200 MW.

San Jose is projecting hourly temps one or two degrees above normal through the 16th, but as the chart depicts, a decent warmup may be in store thereafter.  Look for highs in the mid to upper-60’s as the forecast is rounded out.

SP-15 Demand

SP peak demand fell just more than 200 MW by mid-day though overnight loads were up close to 300 MW.

Burbank is trending cooler during the day with most highs falling 5+ degrees below normal, but more notably, is maintaining normal temps overnight.  The forecast suggests a return to normal by the 19th.

The desert cities will reach the 70’s today and tomorrow but will also see daily temps fall below average as we move into the weekend.  Overnight lows are expected in the mid-40s.

PV Demand

Phoenix managed s few days above normal recently, bucking the trend of a cooler winter, but a return to normal is in store beginning on Friday, at least in terms of daily highs.  Overnight lows look a few degrees warmer than normal with some days failing to fall below 50.

 

Fundamentals

 

Nuke Status

All six nukes remain generating at 100% capacity.

Renewables

SP-15 solar fell back below 5,000 MW each of the past three days, breaking the trend of 5,200+ MW of generation we saw much of last week.

Mid-C wind picked up over the weekend, and aside from a light day on the 5th, the hub has seen consistent 1,000+ MW generation, including consecutive days with 2,000+ hourly peaks.

ISO Gas Outages

ISO gas outages have made a steady climb up the ladder since the beginning of the new year.  Outages have increased 3,300 MW since the 31st, including 500 MW day-on-day yesterday.

Major Unit Outage Summary

PG&E’s Colusa Generating Station shows 300 MW of outages, the largest among gas plants.

Transmission

 

BPA TTC

COI doesn’t show any variation in its TTC forecast as capacity is expected to stay at 3,125 MW through the next two weeks.

NOB maintains its momentary blip on the 14th and is unchanged compared to last week’s projection.

 

 

 

Have a great day,

 

William

STP Update

Good Morning,

 

The following reports reflect the energy impact of the most recent NWRFC STP.

 

Monthly

Energy Scorecard:

  • January – Up 827 aMW
  • February – Up 362 aMW
  • March – Down 107 aMW
  • April – Down 427 aMW

Another big update for January as 827 aMW was tacked onto the forecast, marking the second-consecutive weekly increase, and pushing the total to the highest level in some time.  February bucked the trend of little to no change with a moderate 362 aMW increase.  March and April went the opposite direction; March took its already modest forecast and saw 107 aMW disappear, while April shed 427 aMW following last week’s massive increase.

Daily

January’s forecast shows immediate increases that run through the end of the month before settling for a slight dip for the first eight days of February.  The remainder of February through March 6th show gains and is highlighted by a 1,050 aMW increase on the 27th.  March 7th through April 30th show decreases widening by as much as 600 aMW.

Year on Year

May is showing up in the forecast, but will remain incomplete for a couple more weeks, so don’t draw too many conclusions from this chart.  January’s increase this week once again pushed the month closer to above-average territory.  April remains far from a heavy hitter, especially after dropping 427 aMW this week.

 

William

WECC Update – Part Two of Two

Good Morning,

My takeaway from the fundy crawl was bearish. Bearish off of weather, both warm and wet, plus the TTC cut on the AC won’t help the MidC, though might firm up the ISO. Let’s see if the market is cheap enough to warrant some buys. Today we’ll examine the MidC curve, starting with BOM and include the rolls.

I’ll comment in the above APT order.

These are cheap prices, both Power Price (PP) and Heat Rate (HR). Are they cheap enough, though? I don’t think so, though the heat rate is well below the one year average. I’m concerned about:

  • Sumas still has another $1.00 to give back
  • Loads will drop this week
  • The MidC isn’t dry, just not above normal
  • California will be pounded with rain, maybe adding another 1000 MWs of hydro energy

Sorry, I’d Sell BOM before buying.

Feb is in a death spiral, too, but don’t think that bear trend is over. For the same reasons we’d sell BOM, we’d also short Prompt, and Feb also will see flood control induced flows. SHORT

Two schools of thought on the Prompt|BOM roll. One says Feb will see higher flows than Jan and you should sell the roll; plus it hasn’t gotten a bit pricey after trading negative thirty! The other school says buy this because Jan owns a 14-day warm anomaly whereas Feb still has a chance for a real cold event.  I’d lean towards School One as a bird in the hand is worth two in the bush. That said, I’d short both of them.

March is cheaper, not cheap. If there is drum gate work this year, the draft will come early, most of it in those first two weeks of March. SELL.

The roll isn’t cheap anymore, it is reasonably priced. Odds of cold are greater in Feb, and if did anything, I’d sell the roll (buy Feb, sell March), but I’m short it all, so PASS

April took a tumble, like the other bullets, but is still more on the rich side than not. This is a dry water year, and we may see minimal draft-induced April flows. That said, we are bears in the front, in cash, so why would we buy anything? PASS

The Widow-maker, April-March, and it is priced within the one year average. There won’t be a lot of regulated water assuming a 1248′ draft and there are several instances where April cleared over March (2017!). no reason to clutter up the book with a marginally interesting position – PASS.

Like all things MidC, the May has sold off. But this is a dry water year, 91% as of Friday, so shouldn’t it rally? You can’t blame this selloff on the restoration of Westcoast pipe’s capacity, no, one ever expected the outage to extend into May. Perhaps not, but rally May did off that explosion, look at the move around Oct 15. That was the trade, shorting May off a Sumas rally.  I would be tempted to start buying this but will hold off and focus on the front. Let’s see what June and July have done.

The problem with a small draft is a small refill in May and June. If anything, I’d sell this roll today, but won’t; prefer a directionally short position in the front.

June stumbled Friday, but not by much. We like owning early summer at MidC, but not today. PASS

This isn’t cheap, the June|May roll, but it is a nice position to own if Socal doesn’t restore its import capacity. If Socal does recover that 1 BCF, then all summer bets are off. Still, the roll is a timing play – when does the snow melt? No one knows today so we’d be more inclined to fade anomalies. SELL

So much of this premium is driven by Socal Citygate. Traders hope and expect more $30 gas prices next summer, that is why July is clearing north of a 20k heat rate. I’d be nervous about taking too long of a SP summer position, and through buying July MidC at today’s prices, that is exactly what you would be doing.

I’d suggest you have better odds of high Citygate prices in June than July given the current construction schedules. This roll is quite pricey – SELL

August didn’t budge while the rest of the curve was smoked; but take a look at that heat rate rally last last week. This suggests August is probably $5.00 too high and will be sold down this week.

WECC Part One of Two

Good Morning,

I suspect everyone is at work today after the long holidays; probably easy to miss last week given it was a short week, plus there were no exciting fundies in play to pull you from home. We scoured Ansergy’s plethora of reports and found a few nuggets to share, but sorry to say none of these have us too excited about long or short, but more on that in Part Two to follow.

Let’s start with the weather outlooks:

What else is there to say? This is a moderate and mild forecast for WECC and warm for the USA (watch out, Nymex). How about Precip?

Kalistan is at ground zero of a major storm system, one that may pull the state back to normal. Some of the system spills into the Northwest, but mainly the Snake, so MidC’s water outlook will be about the same as it is today – low 90s. This forecast takes us out to Jan 21, here is where that puts the water year, on average:

About 38% of the year will be realized by Jan 21, on average. As you can see, in just another two weeks more than 50% of the water year has been realized. In other words, it’s getting close to “now or never” though after 25 years in this business the word “never” is one you’d be wise never to use.

There is a telling chart. Sumas is now trading, in the spot, beneath Stanfield. The Westcoast Pipeline explosion, maybe the greatest potential threat to energy supplies the Northwest has seen since 2001, is over. We’re now back to cheap Sumas gas, and we’d guess the slide continues given a robust and full Jackson Prairie and very weak demand.

I love anomalies, that is what I look for when I run all of these reports. The above has an interesting one; NP cleared over SP on a few peak hours in the Day-Ahead LMP market. That hasn’t happened for a while, plus we saw some COB congestion. Given strong exports to the ISO and a weakening Sumas market,  we’d expect more congestion in the coming weeks.

The AC line continuously hit TTC over the last few days and more telling, even the weakest hours were exporting over 2000 MWs. Same story on the DC, all of which speaks to the underlying weakness at MidC. Those exports don’t suggest the ISO is strong, just a long supply balance in the Northwest, and it is growing longer.

TTC on the Malin500 line (AC) is scheduled to drop to 3100 MWs and stay there for over a month. In other words, the Northwest just found itself 1500 MWs longer on most hours. Go back to the transmission flows dashboard, you’ll see that BC has become a significant importer again. Without that swing demand,  MidC would struggle to keep all of its 7k heat rate units running.

Surprisingly, gas demand in Socal is quite robust. Check out those storage draws over the last week – 4 BCF. Now, total storage in Socal is below last year’s low levels. Supposedly, the LDC will complete its repair of the Transwestern Topock line by mid-April which will restore another 500 MMCF. I’ll believe that when I see it, but this is important because once that fix is in place, the utility will commence repairing on a parallel line. All of which suggests that by summer there may be another 1 BCF of import capacity. Stay tuned.

Loads are mostly sideways, except at NP which saw a slight uptick.

We already talked about NOAA’s 6-14 day; these are the hourly temperature forecasts. Burbank is about as close to average as you can get while San Jose is forecasted to see more hours warmer than normal. But the one that jumped out was Portland – nearly every hour is above average.

SP saw a few big gas units come offline over the weekend, NP just one. Who cares, they don’t have the demand to run all of them anyways.

Solar took a massive hit on Saturday – rain! Total renewables on that day were near a season-low.

Meanwhile, the snow anomalies across the WECC have dropped over the last week. The MidC is now at 86%, falling from a water year high of 93%. California is in the high 70s to low 80s, but we’d expect the state to push closer to normal after these storms land.

This is the week of the first Flood Control guidance released by the Corps of Engineers. Here’s ‘our take:

Forecasts for the April-August at The Dalles are 91% of normal – that’s the period used by the USACE. Dropping the 91s into our historical tool suggests a Coulee draft to 1248′ and Libby to 2420′. You can get the rest of the projections from the report.

Coulee’s already drafted down to 1278, meaning that BPA only must pull another thirty feet in ninety days, not too much. This level of water supply also says there might be drum gate work if needed. Should they elect to work on those, they’ll pull Coulee to 1255′ by March 15. That would be bearish for Feb and March, given that 70% of the draft would take place in those two months. On top of that, most of the BC draft takes place in Feb and March.  Hhhhmmmmm.

Flows out of Coulee are up, week-on-week.

Because inflows are up and the reservoir isn’t being filled.

Folsom discharge soared over the weekend in anticipation of that massive storm. No one wants to see another spillgate disaster, right?

Total hydro energy production in the ISO is down over the last week, though we have to believe that trend will reverse itself once these storms make landfall.

Today is STP, and if the NWRFC’s 10-Day is a tell, it is telling us mixed signals. The feds posted a big rally for this week (more MidC weakness) but are cutting energy next week. We still think their STP forecasts are overall, too low.

Just from a regulated water perspective, these levels seem too low. There will be a draft, that is a given with a 91% water supply forecast, though these summaries don’t suggest that. Maybe April is right after the 1500 MW bump last week, but we think the Feb-March remains light.

Conclusions

Weather doesn’t bring us to a bullish sentiment. Socal Gas’s diminishing storage kind of gets us excited but that’s weakened by above normal weather. Further curbing our enthusiasm are these massive storms set to slam the WECC. Watching Sumas slide below Stanfield pours more rain on the flickering bullish embers. The only thing left to make us want to buy are cheap prices, and we’ll get to those in the next post.

 

 

 

Friday Update

Good morning,

 

NOAA Forecast Images

Mid-C, NP, and the Great Basin look to be mired in normal temps for days 6-14, while the rest of the west has a decent shot at above-normal temps for the foreseeable future.  Though it’s winter, so the real news is the lack of cold temp forecast for any region.

Precipitation Forecast

Everywhere south of Mid-C is forecasting wetter than normal, especially in California.  The Mid-C is looking normal to slightly dry while the Northern Rockies, especially Montana, may be lacking significant snow in the back-end of the forecast.

LMP Spreads

SP-PV DA showed $14 of congestion at their peak for the 2nd and $15 for the 3rd.  SP-NP were identical on the 2nd and showed $1 for the 3rd.

Futures

Crude finished up $0.80 yesterday to $47.35, close to a five-dollar increase since bottoming out on the 25th of December.

Gas was down just a penny overall but had swings of up to $0.09 during the span of the day.  At $2.81, gas has fallen dropped more than $0.80 in just a week.

Gas Storage

Jackson Prairie storage plummeted to -229 MMCF yesterday, marking the fifth-consecutive day of withdrawals in the process.  Despite these withdrawals, overall storage is still well ahead of last year on the same date (22,704 in 2019, 16,984 in 2018).

Hydro

 

PNW Reservoirs

Arrow fell just under half a foot week-on-week after notching an increase in last week’s report.  The reservoir now sits 0.3′ below average, but 17′ below the mark set on the same day last year.  Grand Coulee is now five feet below 2018. Dworshak and Chief Joseph are the only reservoirs above last year’s elevations.

Week-on-Week Snow Anomaly

Low level snowfall was most impacted (negatively) in this week-on-week comparison, especially in the Columbia Basin of Washington.  Note how many more stations in Western Montana are now reporting within a normal range compared to last week, while the opposite is true in NP as the Sierra Nevada loses pace against average.

Snow Depth Summary

The Snake River, particularly in SE Washington saw most of the week-on-week snowpack gains as Lower Monumental and Little Goose each recorded a 1.81″ increase.  Flathead was blanketed with 1.4″ as the basin reached normal conditions as noted above.

All other stations managed at least 0.47″ over the past week, though we saw three stations (Wanapum, Priest Rapids, and Rocky Reach) with a loss over the past three days as temps climbed across the west.

Snow Depth Chart

The 1.81″ in Lower Monumental pushed the basin further ahead of normal, as has been the case since Mid-December, and now sits 1.6″ above average.  The difference compared to last year was stretched to more than 3.5″.

Water Supply Charts

This is a peek at the difference between Ansergy and the RFC water supply estimates.  Grand Coulee Apr-Sep Ansergy and RFC have nearly converged in the most recent results.

 

Demand

 

Mid-C Demand

Seattle should reach 49 today, five degrees above normal, but temps revert back to average soon after, at least for the following week.  That also means we aren’t forecasting any dramatic drop in temperatures for the time being, something Seattle and Portland haven’t seen this winter.

Demand fell hard yesterday as the region warmed up and thawed out.  Overnight loads dropped more than 1,200 MW.

NP 15 Demand

NP peak demand was up 250 MW at its peak yesterday compared to Wednesday.  Overnight loads were up an even higher 400 MW.  Demand was also up week-on-week to the tune of roughly 800 MW.

San Jose may not see a return of 30-degree temps for some time as not a single day in the next 14 is forecasting anything below 44.  Next week could start off with a high of 60 if the projections hold true.

SP-15 Demand

SP peak demand rose more than 600 MW by mid-day and overnight loads were up more than 700 MW.  Week-on-week demand was up 1,000 MW yesterday as well.

Burbank’s cool overnight temps should be well in the rearview mirror by tonight as the forecast calls for 45 degrees (compared to 40 last night).  Highs should sit comfortably in the 60’s all of next week while minimum temps are projected north of 45 for the next 14 days.

PV Demand

Phoenix is continuing its path out of winter temps as lows move from 32 yesterday to 47 by the 9th, equaling normal overnight lows in the process.  Highs aren’t expected to peak their heads above the 70-degree mark until the back-end of the forecast, and thus may not happen for even longer.

 

Fundamentals

 

Nuke Status

All six nukes remain generating at 100% capacity.

Renewables

SP-15 solar reached the 5,000 MW mark for the third-consecutive day yesterday and is continuing the trend of 5k+ generation that was saw start in earnest last week.

Mid-C wind had heavy generation over the weekend as the hub topped out above 2,500 MW, but those levels were short-lived as Tuesday and Wednesday failed to reach the 1,000 MW mark.

ISO Gas Outages

After increasing from 791 MW on the 31st to 2,155 MW on the 2nd, ISO gas outages once again fell as yesterday registered at 1,786 MW.

Major Unit Outage Summary

Calpine’s LOS MEDANOS ENERGY CENTER (AGGREGATE) showed the largest return to online status at 561 MW.

Transmission

 

BPA TTC

COI shows just one difference in this week’s projections as the 7th (at 7:00 AM) marks a 240 MW reduction in TTC that extends through the remaining two weeks.

NOB also notes its first alteration to the TTC schedule in some time, albeit just a five hour, 139 MW reduction on the 14th at 9:00 AM.

 

 

 

Have a great day,

 

William

Change Mid-C

This weekly report, Change, summarizes how the week that just ended compares to both last week, and the same week a year ago.  Through 1000 change records, we have filtered down to those that we found most relevant.

 

[render_email_report name=”Change – MidC” date=”2019-01-04″]

WECC Update – Part Two of Two

Good Morning,

We were bears leaving fundies, let’s see if markets are cheap enough to offset that sentiment. Today, we’ll take an exclusive look at SP15 markets, starting with Jan (BOM) and ending up with the near-term Qs.

We’ll comment in the above APT order.

Jan is the BOM now, and it is relatively cheap from both a price and HR perspective, but the fundies look awful. The weather is growing both warmer and wetter which suggests falling loads and rallying hydro. Doubt the latter plays much of a role in setting price but the former most certainly will. Most troubling, all WECC hubs will see loads fall.

But one thing I can’t get out of my head is the embedded Socal Citygate term market premiums; what if these collapse? Length will suffer, that’s what happens. Not saying Citygate will reset but those one bcf draws last week were unsettling. For now, we’ll see all spot gas prices tank off of declining demand, and we should see heat rates drop off of the same. At this point, we are SELLERS despite the low prices.

Feb is just Jan, price-wise. The market has sold down both the PP and HR; now the HR is at or near a contract low. Time to buy? I doubt it because of gas; we believe the sell-off in term gas may resume, but let’s look at the roll.

The roll was a buy a month ago; today it is just fair value for PP and a tad cheap for HR. Given that we’d instead just short both BOM and Prompt, we’ll pass on the roll.

More fairly priced than either BOM or prompt, but negative cash sentiments will have bearish effects on March; we made a small position by shorting both, we’ll pass on March.

Nothing of interest here, Pass.

The April heat rate’s cheap, but the PP isn’t suggesting more substantial gas price premiums in April than any of the winter months. There is not much of a bullish case to be made for this month given that it is too early to get very hot in LA. Our bias would be short, but we have weak conviction. Pass.

Like every WECC winter roll, this was a raging buy a month ago, now it’s a yawner and we’re passing here, too.

Nothing cheap in the Prompt Q, unless you see winter rally. We don’t know what would drive an SP rally in the next couple of weeks; you need a new temperature forecast to make that happen. Note the five-month-long heat rate rally. SP heat rates have cleared at very low levels because of the high Citygate prices, but the market isn’t pricing that in. If anything, I’d sell this heat rate.

The Mother of all WECC term markets, the mighty Q3 SP15 HL. This mama hasn’t moved much in the last two months; it’s just sideways meaning anyone that bought this in the last 60 days has just wasted VaR and credit.  That 1 BCF draw this weekend were eyebrow raisers, will Socal Gas be allowed to pull the same this summer? If it can, or if import capacity is increased, the Citygate premiums could evaporate, and the Q3 would tank $10-$20. We aren’t ready to bet on that, yet, nor are we willing to buy this. Pass.

Talk about an extended rally, the 3 to 2 PP roll is upward sloping since March of last year, nearly a year. The HR is just the opposite because of those fat Citygate premiums. It seems to me that almost everything at SP is just a gas trade and selling this roll seems a somewhat safe way to short gas.

Super cheap heat rate, back to a contract low and the power price isn’t that rich. If I were short in the front and needed a long hedge, I’d consider buying the Q4. We are slightly short SP front, but not short enough to own this dog. Pass.

Wow, looks like the mirror image of the Q3|Q2. You could either sell that roll or buy this one; each does the same thing – shorts gas.

If you think you might be entering into a coma, this would be an excellent trade to put on because you won’t see much movement either way. You could sleep for another six months and probably be marked the same as the day you put it on.

Instead, why not buy the roll? It is cheap PP and fair HR suggesting not much gas roll risk.

Let’s say you are bored, why not look at the prompt cal roll. Price-wise, this is dirt cheap, never been this inexpensive and the HR is reasonable. The roll suggests that the Citygate problems are not resolved by 2020, that is a year away, at least. I’d buy it if VaR weren’t an issue. Who knows, even the maintenance crews at Socal Gas might be able to fix something within a five-year window? Who knows?

WECC Update – Part One of Two

Good Morning and Happy New Years,

I hope everyone had a pleasant and safe New Years. I spent mine on Whidbey Island and enjoyed this sunset over the Olympic Mountains.

Pretty, huh? That was the end of 2018, which was another exciting energy year – they all are, right? Last year we saw Socal Citygate dominate the markets, until that explosion in central BC on Westcoast’s pipeline. Then, all of a sudden, right before the WSPP meeting commenced in Palm Springs, Sumas became the WECC’s driver. A legitimate fear spread across the market that there wouldn’t be enough gas to serve winter loads, the Northwest would see rolling power and gas blackouts.

But that didn’t happen, instead,  Winter never arrived, and Enbridge quickly restored service, most of it anyways, and MidC saw massive price gyrations in its term market. Now, Citygate is back to being the driver, Sumas is rapidly fading. On top of the gas issues, the MidC also enjoyed an extremely dry fall, at one point, around the start of December, the hub’s cumulative precip was about 50% of normal, but all that changed with significant rain and now its closer to 90%.

And 2019 is starting with a whimper, weather-wise.

The entire USA (continental) is warm in both the 6-10 day and the 8-14; these maps take us half way through Jan, the new BOM.

Not only is it warm, but it is also wet; most of the production basins will see above normal precip over the first half of the month. Given the warmth, much of that will come down as rain; only above 5000 feet will snow accumulate. Tough year to own a ski resort.

Surprisingly, the Day-Ahead LMP markets staged a rally yesterday for today. Well, all the markets but Palo, the congestion was priced in across most on-peak hours for PV, but not at the MidC. That hub hardly congests against either NP or SP.

Some of the tightness is explained by rallying power demand, all four traded hubs are up, week-on-week. That doesn’t say much, the pivot date was Christmas, but yesterday was New Year’s, so the comparison was holiday to holiday. Strange that Palo saw the sharpest rally but still congests into SP.

Much of the price strength is explained by cold weather in the south and which drove high gas demand. Socal set a winter peak a few days ago, so did Palo.

Socal Gas’s system sendout matched last winter’s high; if you recall, the prices then gapped up into the teens. That didn’t take place this time, Socal Citygate didn’t move despite the big loads.

Some of this can be explained by the short duration of the cold and the rest by timing – this cold took place over the holidays, most traders were at home counting their bonuses. There was no one around to hype up the cold.

And it is short-lived, low temperatures at both Burbank and Phoenix will rally ten degrees. But let’s stick with gas as I have a few more observations to share.

The above chart plots daily change in total Socal storage. Check out the deep draws, nearly matching last winter’s peaks. This is interesting as it proves Socal can pull 1BCF from storage when it needs to; not only did they pull that BCF, the price didn’t move. Contrast the draws over the weekend versus last summer, only half as much then as now. Why is that? Why didn’t socal pull a B last summer on those sweltering days? Is summer SP worthy of those massive term-market premiums without these Aliso constraints? Will Socal allow a B to get pulled next summer on a sweltering day?

While on storage, take a look at Mist and JP. Mist was pulled hard during the Sumas crisis all the while JP didn’t budge. How ironic, when gas was tightest the facility had builds or modest draws and now has more gas in storage than perhaps ever as of Jan 1. That is bearish for Sumas suggesting there is more room for the term markets to come off.

Socal system sendout was at a seasonal high but power noms cratered at SP all of which underscores how the ISO leans on imports from ZP to serve SP loads. I could have proven that statement by posting Path 26 flows, but the ISO pulled that critical market information for nefarious reasons.

Gas outages at SP cratered with the expiry of 2018, but we’d expect these to rally as the hub prepares for summer. Though in this new world, SP’s gas units are just standby units because of high Citygate prices; now the hub leans on its neighbors to serve its load.

Strong renewals over the holidays; both NP and SP had big wind while the MidC had no wind yesterday.

This dashboard summarizes weekly fundies inside the ISO (there is a daily version of the same). We can easily draw some conclusions by comparing last week against the same week from prior years.

  • Loads are about a gig lower
  • Imports are a gig or more higher
  • Thermal is off about 2-3 gigs
  • Solar is up because capacity has doubled
  • Power price is higher because gas is 80% richer all of which drove heat rates down.

In the fall, the California water gurus were drooling over another El Nino, a big and wet water year. But that hasn’t happened, there were a few storms but more dry days than not. Now the state’s rivers are all below average, cumulative precip.

Three weeks earlier, both NP and SP were above normal and now are around 80% each. The MidC staged a rally, moving from the 50s to 90s but Idaho hasn’t changed, the hub remains in the mid-70s. I like Ansergy’s historical weather image tool, useful for capturing changes across time. Let’s see how the snow year has unfolded:

NRCS Snow Water Equivalent Anomalies

The Northwest was red and brown, now its yellow and green; California was black and blue and now yellow and green and brown.

USA Snow Cover

Dec 31, 2017

Jan 15, 2017

The snowpack built over December but is nowhere close to that big 2017, yet the water year is relatively young still.

Flows through Coulee’s turbines are up, week-on-week.

Some of the new-found water can be explained by increased inflows, most of those are regulated. They are about to get more regulated, next week the Corps of Engineers will release its first Flood Control guidance (is the Corps impacted by the Federal shutdown?). Here is our early bird on that release:

The NWRFC’s current TDA Apr-Aug water supply forecast is 92%; using that and comparing to the last 20 years (See tables) we can surmise the Coulee draft will range between 1244 and 1258. That range also puts drum gate work in play, we haven’t heard any news on that, have you?

One certain bullish item is reservoir levels – these are all off, in aggregate, when compared to last year. The Coulee deficit is narrowing as averages are falling and the project is not drafting. BC remains well below average but has a big snowpack building.

Check out peak HL hydro energy in the ISO; this has soared from the end of summer and hit 4000 MWs a few days earlier.

The NWRFC has revised its forecasts from last week; those were ridiculously low, and now is projecting energy builds over last week’s STP. Our take is that the entire 120-day forecast is too low, we’d expect big builds across all months.

Take note of the change on Monday in the AC’s TTC – this is an extended derate to 3100 for nearly two months. Another bearish nail in the MidC coffin.

BC exported to MidC yesterday; this followed a week of strong buying. Perhaps that dearth of wind is the explanation? Maybe BC is just MidC’s wind battery? Something was tight at MidC, the DC actually flowed north for an hour, and the AC didn’t come close to TTC for the entire day. Palo cut its exports to the ISO, probably angry over the hefty congestion charges for its dirty energy.

Conclusions

Bearish. One word to say it all; there is nothing in the fundies that I saw to make one want to get long. Well, let me caveat that last thought by saying nothing but the market. I guess if prices are low enough, why not buy? More on that in the next post.