Mike’s Take – Oct 9

Good Morning,

The news of the day is a big spike in ISO loads, up nearly 5000 MW from the start of the week due to the LA valleys reaching the high 90s:


while northwest loads languish in the October doldrums, enjoying neither HDDs or CDDs:


Though that will soon change as the northwest enters its heating season.  Over the next eight weeks the Ansergy load forecast for Mid-C is expected to climb 7,000 MWs:


Perhaps that is why the NWRFC has cut a gig of energy out of its near-term forecast (RFC 10 day):


This is a material change in their forecast and may portend for a bullish STP on Monday but we will want to see how today’s 10 day looks before climbing out on that limb.  I will update this post once it comes out (in a few hours).  On the reservoir front Coulee is passing inflows, Hungry Horse, Lake Pend Oreille and Dworshak are still drafting, and Libby is actually refilling a bit.  The total USA Columbia storage is running about 4-5% below the previous four years rending BPA a few less bullets to fire at big cold, something we haven’t seen much of in recent years.


On a more bearish note (for Mid-C) the Canadians are back to their exporting ways having sold about 700 aMW into Mid-C yesterday; contrast that with the relative empty line for the first week of October:


The second plot is the ISO imports from Mead and Palo – note the combined total is about 1000 MW higher, nearly making up for the DC cuts, but not quite:


Clearly imports are off about 1000 aMW in the ISO and exports out of Mid-C are off nearly the same, perhaps even more.   This puts pressure on the ISO stack while not affecting Mid-C much as it is mired amidst the point in the stack where the 7000 heat rate CCCTs reside:


Look at those inflections, there isn’t much hope for Oct Mid-C, at least from where its at in the stack at the moment.  November paints a different picture:


There is actually some movement in the curve on the more bullish cases (and perhaps even more relevant is the relative minor downside in the bearish tests) especially if you believe, as I do, that the NWRFC has over-forecasted November flows:



Really?  2015 flows will be larger than last year and equal to 2012 and 13 and over 1500 aMW more than in October – when the reservoirs are 5% lower than any of those years?  If I was was betting man I’d suggest that November flows will be revised downwards and will only be high if there is a cold event.  Either way it seems to be setup for a decent month, especially when the market hates Mid-C so vehemently:


Granted gas is a train wreck but we haven’t entered a November this dry in years.  Even December is despised by the market:


I am a believer in fading trends and the last three months the market has swung from a Mid-C lover to a hater; maybe it’s time to start showing some love again?