Market Commentary

Welcome to Ansergy’s WECC Market Commentary. Once a day, our clients receive timely (pre-market) updates on the major drivers of price. We are sharing those posts with you, on a two-week delayed basis. If you would like to access the live commentary, please register for a trial. …. Team Ansergy


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="2018-12-22"]

Ansergy’s Holiday Schedule

Greetings,Here is our schedule for the coming holidays.

Christmas

  • Monday, December 24 - holiday
  • Tuesday, December 25 - holiday
  • Wednesday, December 26 - Working - WECC Update
  • Thursday, December 27 - Working - STP update, Change Reports
  • Friday, December 28 - Working - WECC Update

NewYear's

  • Monday, December 31 - holiday
  • Tuesday, January 1 - holiday
  • Wednesday, January 2 - Working - WECC Update
  • Thursday, January 3 - Working - STP update, Change Reports
  • Friday, January 4 - Working - WECC Update
We will be monitoring emails and skype; if something comes up, or you need our assistance, drop us a note. Mike will be posting to Public Chat throughout the holidays.Happy Holidays
  • Team Ansergy
  • info@ansergy.com
  • 206-877-0991
  • skype: longmidc
 

WECC Update – Part Two of Two

Good Morning,We left off our first post a shade on the bullish side, driven by colder weather. Like all sentiments, the buy/sell decision needs to be relative to market price. Today, we'll look at the front of the curve, BOM and Prompt. The trades to be discussed today are in the following APT order.Each subsequent chart can be accessed by clicking the chart icon to the far right. You can also pull them down directly from the TradeRank reports.First up, the spread between NP and MidC for BOM. This was cheap during the pipeline / Sumas crisis, now its flipped to NP premium by nearly $10. Given Sumas is still trading premium to PG&E citygate the spread feels rich. Offsetting that sentiment are the increased flows into Sumas at the US border; nevertheless, a cold event in the Northwest could be more bullish than a cold event at NP. This is BOM, just ten days left; we'd take out a flyer and SELL the spread.This spreads Palo against MidC, a dubious virtual given no direct transmission between the two, but for those creative gamblers its worthy of a look. This was dirt cheap while Sumas was on life support, now it is just cheap but, for the same reasons as NP, we'd sell it (Sell Palo, buy MidC).NP's Dec heat rate was silly cheap a few weeks back, it has rallied off of that, but we'd suggest there is more room to move up. With cold weather approaching, we are BUYERS.The Palo heat rate has fully recovered, the price is still above the one year average, and we aren't so bullish we'd go long everywhere.  PASS.Cheapish heat rate, modest PP that just posted a reversal of a two-week long slide ... on the cold weather, and going into a long weekend... BUY When trading off of cash, which is what we'd be doing by buying BOM off of cold, you may as well do the same thing in the Prompt, especially when it is the 20th of the month. So, all of those Dec sentiments ... press Repeat.If we sold the BOM NP-MC, we probably wouldn't do the same with Jan. Our fear here is water in the Northwest. BPA will begin drafting again to serve the incremental cold-driven load, that will leave Jan longer than otherwise. Plus, if the cold is a headfake, we'd not want a book too directional over the multi-holiday span, plus liquidity will be an issue.  BUYThe spread's heat rate is more pricey than not, but the power price is still on the cheap side. Plus, PV sees massive LMP congestion into SP ... SELLWe already said we'd mimic our Prompt with the BOM sentiment, but let's look at the rolls. The MidC PROMP|BOM is now at a contract high - HUH? Where this was trading $-30 a month ago, now Jan is premium. Makes no sense in front of a cold forecast... We'd short this for size.The NP never got stupid-priced like MidC because PG&E Citygate isn't Sumas; still, the roll is at a contract high, and Sacto and its minions will be cold over the holidays... SELLWhy not, sell this roll too off of problems in the ISO over the holidays.

WECC Update – Part One of Two

Good Morning,The news de jour is the west has been growing colder for a week straight; now it's growing dryer, too.Mostly the interior, but the anomaly spills into the load-center coastal regions. Power and gas loads will be remarkably higher throughout BOM and possibly spill into Jan.Dyer, too, after three weeks of above average precip, now the NW and Cal have a negative anomaly. Makes sense, high-pressure cold blocks the storms; rare you get both wet and cold. Both forecasts are bullish, though it's the demand we're more interested in.For the record, these hourlies are not "cold," they are just colder, but the trend is to walk down the temperatures and should that  continue, then it may just get cold. Don't expect panic; the system is healthier today than three weeks earlier. The warm wet allowed both gas and hydro storage to recharge, plus the Northwest is no longer threatened by the Westcoast pipeline explosion impacts. WEI will increase flows as needed; if it gets bitter cold, the pipe will flow 100%.Spot gas is off but still relatively strong; recall, last year on the same day Sumas had $2.00 handle; almost every hub is $1.00 or higher than last year. With cold, these spot prices may move yet higher, at least the ones in California.Citygate term markets found a bottom, at least a temporary one, but we'd suggest that small bump yesterday was more Nymex-driven that Socal.Sumas mostly just continued its slide back to reality; the market has the Feb contract beneath Henry, a sign pointing to a complete return of Westcoast's capacity. That said, cold weather will support the prices, then they'll slide more until basis reverts to its mean.Hey, here's a rally! LMP spreads against SP blew out over the last few days at all three points. Mostly, this is a reflection of the gas spreads; there is nothing bullish going on inside of SP.Socal's Sendout has cratered on those exceptionally warm temperatures; interesting, because PG&E's loads are up and soon to spike back to the levels we saw earlier this month.The above plot is a new dashboard, a chart of the last 30 days of LDC demand by power hub. Ansergy has mapped all of the LDCs inside a power hub and aggregated their gas nominations. This data is a close as you'll get to actual gas demand, at least outside of the two Cal LDCs.  PG&E's demand has rallied, MidC's tanked and is now sideways, same with Socal.Power demand at the four traded hubs is either sideways (SP, NP, PV) or in a free fall - MidC. Cold weather should change that.The MidC's wind has been consistently strong further weakening its cash markets. California's solar has been volatile due to the big storms systems that have blown across the state.Check out the changes to the SWE (Snow Water Equivalent) anomalies at the MidC. A week ago, the hub-composite was 70%, now it's in the high 80s. Those storms pushed up the NWRFC's water supply forecasts a bit. As of yesterday, about 25% of the Northwest's snow pillows were above normal; a week ago maybe 5% were.We also took note of the drops in California; NP15's composite snow anomalies were above normal two weeks earlier, now they're in the 80s. El Nino-like water ... not yet, anyways.We'll be closely watching these numbers over the holiday; the first flood control guidance is released around Jan 10 using the TDA Apr-Aug forecast. Given a drying trend, that forecast may be in the low 90s which would suggest a modest draft into the 1240s at Coulee.Energy from that large project has been cut, much of the water coming into Coulee is refilling the reservoir. We'd expect discharge to pick up as BPA drafts to serve load next week. The NWRFC doesn't see that, though.Just two days after releasing its weekly STP, the agency has cut its December flows across all days in its 10-Day. We'd expect just the opposite, a strong rally as the water is used to meet incremental cold-driven power demand.A parting comment on this week's STP - it's too low. These forecasts are suggestive of a near-record draught, but that isn't what we saw in the current snow anomalies. The Northwest is below average, but not by much, and we expect the Feb-April forecasts to see some significant upward restatements.BC exported energy in a big way at MidC yesterday which was surprising given relative weak fundamentals at the hub. Was there an outage?

Conclusions

Cold, but not Siberian-like, yet the trend has been a colder outlook for seven straight days. Imagine how cold it would be if that trend continued another seven days? A more bullish near-term outlook, coupled with relatively low market prices, has us believing length is the position de jour. More on that in the next post.   

Mid-Week Update

Good morning, NOAA Forecast ImagesWhile the Easter-half of the country looks like they will be basking in a warmer than normal Christmas, the WECC is set for another cool down, especially the Great Basin and the Sierra Nevada.  The week following Christmas may be even cooler as the blue blog on Winter flows north into Mid-C to ring in the New Year.Precipitation ForecastLook for heavy precip stretching from the Southern Cascades to the Eastern edge of the Rockies as we move toward Christmas.  The rest of the west projects a wetter than normal precip total in over days 6-10, while the latter half of the forecast could revert to normal.  The real question is whether this precip will coincide with cool enough temps to make a noticeable impact on snowpack.LMP SpreadsSP-PV DA prices have both come off considerably over the past week and are both showing similar peaks as well.  The 17th had a difference of just $3 at $74 and $71 respectively.  SP-NP showed a similar relationship with the same $74 and $71 prices on the 17th, though NP has fallen off a bit since.FuturesCrude is desperately searching for its floor as it dropped another $2.20 yesterday and is now marking consecutive days under $50.  Crude managed a $1.00 gain by mid-day but that quickly evaporated as prices fell more than $3.00 in just a few hours.Gas was up $0.21 to $3.72 yesterday, bucking the downward trend that was started on the 10th.West Term Gas PricesHow low can it go?  January Sumas dropped $1.24 week-on-week and $0.55 day-on-day.  A mild start to the winter isn't helping prices and without a significant cooldown in the forecast, that may not change significantly.February had an even more dramatic change (at least in terms of percentages) as prices fell $1.11 week-on-week, or 23%.Citygate is in the midst of its own freefall with prices dropping more than $2.50 week-on-week for January and $1.45 for February.Gas StorageIt was mentioned in chat last night, but with Jackson Prairie's 139 MMCF injection yesterday, the site topped any single-day injection from all of last winter.  Total storage is more than 1,400 MMCF higher than each of the last three years on the same date and roughly equivalent to what we saw in 2014.Spot GasSumas spot fell $0.39 day-on-day yesterday, relatively mild to what we saw last week, but still a significant drop.  AECO was the big mover in the other direction as it added $0.31 to its price after finishing at $1.69.Sumas spot has nearly returned to a pre-explosion price.

Hydro

 PNW ReservoirsArrow has shed roughly 4.5' since the 9th and has dropped below average for the first time in over a year.  The reservoir is now 12' lower than it was on the same date last year.Hungry Horse dropped below the average line for the first time since May, though its decrease is much more gradual than Arrow.  Hungry Horse is only a foot lower than it was last year, not quite the anomaly that we see in Arrow.Week-on-Week Snow AnomalyWhile most of the low-level snow has melted (thanks to warm temps and rain), the higher elevated mountains were just cold enough to add significant snowpack.  The Cascades were able to cross the 50% of normal barrier while the Idaho and Montana Rockies are approaching 80% territory.  We could see normal levels approaching soon if the forecasted precip manages to hold true this week.Snow Depth SummaryWash West and Priest Rapids checked in with the largest week-on-week increase -- each with over 2.5".  Looking closer at the columns you may notice the totals fluctuating daily, showing how fragile the freezing level has been in these Mid-C storms.Mid-C as an aggregate added 1.2" over the past week.Snow Depth ChartGrand Coulee added enough snowpack over the past week to briefly cross 2018, though a warm day was enough to wipe out most gains.  Just to illustrate how an early-season lack of snowfall isn't a harbinger of the rest of winter, I've added 2010 to the chart.  Notice as of today, 2010 would be leading both 2019 and 2018.Water Supply ChartsThis is a peak at the difference between Ansergy and the RFC water supply estimates.  We are seeing some convergence between Ansergy and the RFC for Apr-Sep in The Dalles. 

Demand

 Mid-C DemandChristmas should mark the end of consistent above-normal hourly temps for Seattle, but until then we could see a variance of up to 8 degrees on the 10th with a balmy high of 51.  There isn't a single hour of freezing temps in the current forecast.Not surprisingly, Portland will be even warmer as the 20th shows a high of 54, ten degrees above normal.  Temps fail to drop below freezing in Portland as well.Loads were off close to 200 MW yesterday and were down more than 2,000 MW week-on-week as mild temps blanketed the Northwest.NP 15 DemandNP peak demand was up slightly yesterday compared to Monday but remained well below last week.  With mild temps in store for San Jose (highs in the 60's through the 24th, and nightly lows consistently above 45), loads may stay in this range for another week at least.Sacramento is holding onto several highs in the 60's as well, though one day over the next 14 managed a sub-40 forecasted low.SP-15 DemandSP peak demand was mostly flat yesterday, maybe increasing 50 MW day-on-day.  There wasn't much of a difference week-on-week either as just 100 MW made up the difference by most measurements.All eyes are on Burbank's impressive high of 82 on the 20th, 21 degrees above the previous 10-year high.  With lows in the 50's, there isn't much to drive demand this week.The deserts are slightly cooler but are still forecasting highs in the upper-70's through Christmas.PV DemandPhoenix is projecting highs in the 70's through the 24th before temps drop off a cliff, bringing a high of just 55 on the 26th.  Despite daily highs dropping next week, lows are above normal in most cases as temps fail to fall below the high-40s.Nuke StatusWith CGS back at 100%, all six nukes are generating at 100% capacity once again.RenewablesSP-15 solar dropped to just 3,300 MW on Monday, off from 4,800+ MW we saw over the previous six days and well below the 5,000+ Mw we saw generated consistently the week prior.Mid-C wind was back above 1,000 MW yesterday after being mired in some slow generation days since the 15th.  Still a far cry from the 2,600 MW hourly peak we saw on the 12th.ISO Gas OutagesISO Gas outages was up 300 MW yesterday, reaching a total of 3,811 MW.  Despite the day-on-day increase, total outages are still 1,600 MW short of the total from last Friday.ISO Outage Unit DataMountainview Gen Sta. Unit 4 was the main culprit for the outage increase though several other stations also contributed.

Transmission

 BPA TTC COI marked two more changes this week as TTC runs 250 MW lower through 6 AM tomorrow.  Also note the large increase beginning on the 29th at 10 AM where TTC moves from 3,840 MW to 4,550 MW through the remainder of the Forecast.NOB remains unchanged in the most recent projections.   Have a great day, William

ENElyst | Ansergy

Greetings,Ansergy will be sharing some insights into WECC markets on the ENElyst chat platform. The session will begin today at 12:00 PM PST.You'll need a login, click here to get complimentary access:Sign in at https://chat.enelyst.com/We'll be discussing the status of WECC fundies and taking a look at a few trade ideas.Cheers,
  • Team Ansergy
  • 206-877-0991
  • info@ansergy.com
 

STP Update

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

Monthly

Energy Scorecard:

  • December - Up 340 aMW
  • January - Up  368 aMW
  • February - Up  418 aMW
  • March - Up  247 aMW
  • April - Down 2,111 aMW
Increases across the board this week, albeit relatively modest in most cases.  December followed up last week's addition with another 340 aMW tacked onto the forecast.  January had an almost equal 368 aMW increase, ending a two-week slide in the process.  February added 418 aMW and prevented the fourth-consecutive weekly decline in forecast.  March added a small 247 aMW jump to round out this week's update.APRIL NOTE: Though we only have data through the 16th, this is material, and bullish, change to that strip's outlook - a cut of 2 gigs. We are less confident in their confidence; it's so early in the water year to be making such drastic and draconian changes, especially in the face of the massive storm system that has already landed and will continue to pound the Northwest for another week.

Daily

December falls as far as 1,000 aMW behind last week's forecast as of the 23rd, but make an even larger jump thereafter, climbing up to 1,400 aMW higher by the 26th.  January begins the month a few steps behind before maintaining a 500-700 aMW increase going into March, which, coincidentally, holds a similar pattern through the month as well.  April shows a massive drop to begin the month -- 2,800 aMW as of the 3rd, though that tapers toward the end of the forecast.

Year on Year

This week's update showed enough in the way of increases to at least look worth of being displayed on the same chart...save for April which fell further behind every year aside from 2010 and 2001.  With only half the month forecasted, it's possible April could still see significant changes over the next couple weeks. William

Change SP15

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 - SP15" date="2018-12-19"]

WECC Update – Part Two of Two

Good Morning,Today we'll examine the MidC bullets from BOM to Sep and include the rolls. The rolls are illustrative of relative pricing, and we think its easier to draw conclusions on the outrights by studying them.We will report in the following order:Dec is cheap from both PP and HR (Power Price and Heat Rate) perspectives, plus there are these fundy facts to consider:
  • Trending colder weather forecasts
  • Sumas inflows still short
  • BPA's net reservoirs remain 1 MAF below average
These are reasonably solid facts, couple those with low prices and heat rates and we are ........... LONGWhat is true for BOM is usually valid for Prompt; the two have an R-value that approaches 1.00 about 95% of the time; when they diverge it can be violent. Here we see similar low prices and heat rates, but let's turn to the roll before making the final call:Remember when we put out the strong BUY for this roll, that was like $25 ago; now it is at or near a contract high - how times change.  Note the rate of change is changing in power price, the chart was straight up for a week or two; now it appears to be flattening. Given perhaps tighter cash off of rallying demand, we'd be inclined to sell this roll. In other words, we'd own the Dec over the Jan.Feb never rallied up as much nor came off as hard. With snowpack building so is the February draft, but the heat rate is still cheap suggesting the gas isn't.  One valid Mid-C fear is the early return of Sumas to 100%, and we think this isn't an outlier, it is increasingly becoming our base case. I'd not want to get too long the MidC because of that. Therefore we'd SELLAnother roll that rolled back to reality; this one is almost back to the contract average on price but is close to contract high on heat rate. The latter is because the Feb gas never got as high as Jan. We'd not own this roll, if you bought it back then, take the profits. Otherwise, we'd PASSLike Feb, still rich in price and reasonable in HR. This still contains a small piece of Sumas premium, and perhaps that piece is still too big. SHORTMAR to FEB is low price and reasonable HR. Perhaps the market remembers 2017 and those biblical March floods - 550 KCFS past Portland. Odds are, you won't see anything close to that this year. BUYApril, one of the most volatile MidC bullets, a veritable widow-maker. It's rich and not because of Sumas; the premium here reflects a dry water year; the market assumes little draft. Wrong, even NWRFC has pegged TDA at 94%, and that number is growing. Ignoring Sumas, we look for anomalous pricing relative to the water year, and this seems rich ... SHORTI think it was the April-March that brought down Amaranth in 2007 (and added a $B to Arnold's book); this is power, but this roll is just as volatile. Now it is more reasonably priced than not ... PASSMay is often the Mid-C's red-headed stepdaughter and usually is scorned relative to April or June. That isn't the case this year, the May is near a contract high, and its heat rate isn't cheap. Given a growing water year, we'd..........SHORTThe roll isn't cheap or rich, it's just ........... PASSJune is interesting as it almost always contains peak hydro. It also gets the free-rider effect of hot ISO or Palo. On rare occasions, the melt is delayed and June gets smoked for a few weeks. Probably a more significant risk is that Calif never gets hot in June; given this is near a contract high for PP and the HR isn't cheap , we'd ........SELLJune to May and the market is pricing it like it always does - big June premium. Way too early to call either Volume or Timing, so we just fade anomalies ... SELLWow, this is straight up both HR and PP; but with a growing water year it can't keep going up forever, or can it? Big cold in Seattle would pull this up off a cash-sympathy play, but we do not see that just yet. I'd be more inclined to short this then buy it.The June to July roll is at contract highs for both HR and PP. Fade anomalies, SELL.Aug is like July; bullish both HR and PP. Everyone fears a repeat of last summer when the ISO had a Citygate meltdown. I'd fear that too and this is too deep into summer to waste VaR on ... PASSCheck out the heat rate resistance; its hit that high about five times and come off, but the power price just keeps going up. I'd be comfortable selling this roll, though doubt you'd find the liquidity to put it on or get out of it. But in the virtual world of ours, we ignore those factors and will be ..............SELLINGSEP - the poor man's summer. Cheap HR, rich PP................ PASSWOW, cheap everything. BUY

WECC Update – Part One of Two

Good Morning,It feels like the markets could turn if only they'd get some help from Mother Nature. Where we were all raging bulls with visions of blackouts blanketing the Northwest and LA, now no one owns anything, and the markets keep sliding.BOM Power is a freefall, a death spiral to zero, or is it? If gas firmed up, the pain would dissipate. Will it? Has it?Socal Citygate looks more tippy-toppy than it did last Monday; back then, the hub looked nearly invincible, now all the prompt bullets pulled back last week. How about Sumas, trainwreck that she is...The Market hates Sumas, the bleeding hasn't ended, or at least as of the close on Friday, it wasn't over. What would turn around the Sumas would be some new bullish news on Westcoast's pipe - like another cataclysmic explosion of about sixty miles of pipe that would take a California-like three years to repair. Let's see if that happened over the weekend:Oh my, just the opposite. Those pesky Canadians fixed the dang pipe; now it is flowing just below last year's winter levels. No respite here, but maybe our initial savior, Mother Nature, will step up to the plate and lob us a watermelon.Well, Sunday's forecast has hints of bullishness; recall last Friday, there was but a tiny circle, a total of about 2.1 square miles, of normal temps somewhere between Utah and Idaho. Now, the entire WECC hinterland is either below average or normal - that is a confirmed bullish change. But the load-center coastal strips  - from SD to SEA - are above normal. Still, the trend is cooler, perhaps that extends and turns these maps dark blue!Cash is up a bit but more interesting is the flatness of the curve across all LMP nodes - there is like zero congestion anywhere. Free transmission, pay nothing for losses.The Northwest was cold, so was California, and we bet that cold made a big dent in Jackson Prarie's storage - right?Wrong, storage at JP is above last year's, same day, levels. How's that happen when Sumas has been a half a BCF a day lower than last year? Call it the resiliency of BPA and its wards; they quit burning gas at the I-5 turbines, and it wasn't that cold, loads were never that high, and whatever rally occurred was quashed by a slight ramp-up in hydro.We love this dashboard, and so should you, as it summarizes everything you need to know about the MidC. The top group is a weekly week-on-week; the bottom is a year-on-year comparison; and the right side is the same for LL. Here's the same for the ISO:The ISO's dashboard is slightly different since it deploys its own data sources. But at a glance, you can see what you need to know.One fundy you already know - MidC Loads cratered, week-on-week, while SP's are sideways and NP's are off. Here's the gas side:PG&E demand has tanked while Socal's is sideways; but while PG&E load is off, so are its imports.Yet it's getting colder, right? Not in LA, that land of plenty may hit the 80s this week!. Dust off those AC units and pool-chillers my friends, it's getting toasty. While LA roasts, check out the changes in temps at Portland, not only are they falling, they are getting colder than three days ago. The trend is the friend and Northwest loads are going to soar by week's end.Kally was wet over the weekend, check out those solar haircuts; the Northwest was blustery, Seattle had gusts in the 60s, and BPA was awash in wind energy.Our water supply forecasts for Cal are mostly just normal to slightly above while the PNW is below average, but not by much.The precip outlook is above normal across the WECC:Which should push the NWRFC's forecasts up, perhaps converging back to Ansergy's numbers?Speaking of the RFC, those folks must have gotten back-door long as they just shaved about a gig off of their 10-day. I'd guess this is more a reflection of how warm it is which drives BPA to cut discharge and conserve scarce water molecules. Either that, or it is just random noise? Given that today is STP Monday, you might brace yourself for a BOM haircut.We see flows out of Coulee dropping following the warm-up; inflows are not rallying fast enough to force more water through the turbines. Instead, water is staying in the reservoir:Don't be confused by the "MIN"; the current values are the MIN, and you can see that over the last few days BPA has filled a foot or so.Flows in BC are mostly up on substantial rain and snow.The US flows above Coulee are also mostly up, though we see some substantial regulation changes taking place at Libby, Horse, and Lake Pend Oreille. Check out the flows on the Spokane, those just gapped up to nearly 7kcfs, which is approaching hydraulic capacity for most of Avista's projects.Some modest changes in BPA's TTC: the derate at the end of the month is off; now the AC is back to full capacity.Energy is flowing into Canada from the MidC; that is a gig swing in net energy at MidC; the DC went to zero for a few hours yesterday; flows into the ISO are off at both Palo and Mead.

Conclusions

It's not easy to call bottoms or tops, but this recent sell-off is feeling tired, to me. The weather is trending colder and prices are cheap, both relative to where they've been and just cheap fundamentally - as long as gas quits puking. More on that in the next post.