Good Morning,
Cash had a good rally yesterday, especially at the Mid-C in the off peak, where it settled in the 12s following last week’s surreal price of $0.10. Credit a dearth of wind, a slight demand rally in the ISO, and the general tightening of the Mid-C hydro screws. NP also realized a rally with a $5.00 rally over the previous settle and for the same reasons as MidC plus the Diablo Canyon Two bonus. Even SP participated in the move up while Palo barely budged. We think that the move up is justified given the fundamental outlook as of yesterday but we are less convinced the remainder of the month will remain as bullish.
Temperatures – Hub Level Summary
Shaded hubs reflect seven day average temperatures above normal and four of those six hubs share in that reality, though the two that are below normal also happen to be the ones which currently have potential cooling degree day loads. Mid-C had the greatest day on day increase, up 1.35 degrees from yesterday’s forecast. SP also rallied but is still below normal and just barely higher than the northwest.
The precipitation outlook for the WECC hubs is also worth a look:
NP15 went from dry to wet overnight and is now projected to receive 1.7″ of precip over the next couple of days:
All of that precip will come as rain and will rally every river in the state that has generating capacity and will literally rain on the cash parade. The NP (and SP) rivers are operating well below hydraulic capacity so any increase in flows translates into additional energy.
Of course this prediction of more hydro energy is premised upon that rain actually materializing and, given the dramatic change in the forecast, we have our doubts, so watch the 0Z tonight.
The northwest remains warm, even warmer than it was yesterday, especially over this coming weekend:
and with warm weather in May comes melting snow, unless that snow already melted which is pretty much what has happened across most of the northwest’s hydro basins. So despite a warm weekend, and a warm Monday, generation flows on most MidC river basins have realized week-on-week declines, some of which are material reversals:
This trend will be tough to reverse; it would take some big northwest storms to generate builds, but none of those storms are currently in the two week WX horizon. We mentioned a load rally, week on week, but that was a southern phenom; the Mid-C’s peak loads actually declined 1600 MW.
Mid-C Actual Hourly Loads (12 Balancing Authorities):
NP and Palo did have rallies, though we think those rallies are short-lived:
NP 15 Actual Hourly Loads (3 BAs)
Larger loads helped support the cash rally but the refueling of Diablo Two and a loss of wind energy across the WECC were the primary reasons. Diablo won’t be back any time soon, not in May at least, but the wind energy will return, especially at the MidC:
In sum, we think the Monday rally is a head fake driven mostly by no wind, the loss of Diablo, and some modest load rallies which leads us into our thoughts on BOM:
Palo Verde
With tiny deltas between the forecast and the market and the inevitable return of the PV nuke sometime this month we don’t see much opportunity for playing BOM PV on either side and will conveniently take the cop out position of “Flat” or “Hold” or “Ignore”
NP15
We have a different outlook at NP; we like both the on and the off as the forecast has recently rallied past the market, the nuke is out and, despite the potential for a substantial rainstorm (speculative at this time), we would be long both the on and off.
SP15
We like the SP less than the NP and wouldn’t waste VaR going long but might create VaR by shorting SP on peak and do nothing with the off.
BOM MidC is a challenge for me because our forecast suggests a short but my gut says otherwise. My issue with the forecast is the STP which is now used internally and will continue to be used until the next water year starts. Yesterday the RFC added another 900 aMW to May which pounded the forecast last night but I’m not convinced we’ll see 900 aMW additional energy when the month is said and done. This current heat wave should drive a surge in natural river flows but there is no surge, maybe its a few days coming, but too many of the northwest rivers are done, runoff over, and more are soon to fall to the wayside, plus the Coulee refill has barely begun and drumgate is going to end this weekend (confirmed by the Corps, by the way). If anything my inclination is to be long May but since we’re virtually long the June and July there is little reason to be long BOM other than wanting to be a pig. We’ll pass on any position in May MidC at this time but watch closely for some response from the rivers with this latest heat.
