Friday Update

Good Afternoon,

Been a crazy week for the Mid-C hydro outlook with both the Ansergy and the NWRFC’s flow forecasts swinging up and down off of the US Bureau of Reclamation’s drum gate maintenance work at Grand Coulee.   The current outlook, from the Ansergy WECC Forecasts, are a shade more bearish than yesterday.

Ansergy’s WECC Price Forecasts

Saturday, Feb 13001_FCnextday

Bal Month (Feb 12-29)001_FCbom

Check out the one week change at Mid-C: -$4.88, all driven by the maintenance at Grand Coulee.  The rest of the hubs are off, mostly driven by declining natural gas prices.  Mid-C is now a lot longer BOM and March but expected ISO imports are relatively unchanged as the lines were loaded before the drum gate-based changes were implemented.

March 2016001_FCprompt

April 2016001_FCapril

Q2  2016001_FCq2

Q3 2016

001_FCq3

Before diving into today’s fundamentals I wanted to share a confirmation of the drum gate project via the TMT Minutes:

001_DrumGate

For the time being we are modeling the project commencing March 15.  Most likely the work will actually be done as the water year is growing, not diminishing (see Mary’s comments above).

Current Water Supply Forecast001_WaterSupply

I find it strange that we are not seeing more of a separation between the Jan-Jul and Apr-Sep.  After all the NWRFC has put an additional 2000 aMW in Feb-Mar due to drum gate.  I’d a thought that would jack Jan-Jul more than Apr-Sep, but that is not what the above table suggests.

Weather Forecast – Mid-C Composite001_WXmc

Expect Mid-C to be warm and wet for the next six days, then followed with dry and slightly cooler, though the calendar is working against bullish weather days at Mid-C as the evidenced by our 180 day demand forecast:

Daily Mid-C Demand Forecast

001_FCdayDem

The slow grind of decaying demand has already begun and will continue for the next three months.  There is still hope for an arctic blast but it is more hope than anything else, at least the 11-15 hold no promise for such fantasy.  SoCal is starting to cool off after seeing temperatures in the high 80s:

Temperature Forecast – Burbank001_WXbur

Cooler outlook will lower demand and put downward pressure on SP but the fact the event occurred in mid-Feb should be acknowledged.  The next heat wave may be 5-10 degrees warmer as the calendar slides into summer rendering us cautious SP bulls.

The River Forecast Center has a slightly, ever so slightly, more bullish 10 day outlook:

NWRFC STP vs 10 Day

001_RFC10day

The backed of this plot is suggesting 500-1000 aMW less energy at the end of next week and provides the basis for a slightly less bearish STP next Monday.  One indisuputable bullish turn of the screw is wind:

Wind Energy -WECC Actuals (BPA + ISO)

001_Wind

Except I’d call it bearish because it is hard to get much lower than what we realized this week.  Looking further out I’d be inclined to cover June Mid-C shorts, either on or off peak, and would be taking outright length in the south (PV or SP) from May through Summer.  Prices are cheap, so much bearish news has already been priced in.  The recent heat wave in SoCal should be a wake up call to where things may go for later spring and summer.

Enjoy your weekend,

Mike