Good Morning,
Yesterday’s loads were up in the south but are slated to decline with cooler temperatures; the wet weather in NP has held mostly, off 0.2″ in today’s forecast; northwest wind will rally over the weekend; and rivers everywhere in the west are dropping. Meanwhile cash markets are strong as are the ISO’s LMPs:
Where did the congestion go? Those load rallies helped, so did the calm WECC weather, but mostly its do to falling hydro across all hubs, especially in the northwest:
Even the NWRFC is jumping on the bull wagon with their 10 day forecast:
A 500 MW change you could argue, should argue, is RFC noise but what’s telling is that the revision is downward where for the last 12 weeks most, if not all, changes were up; now they are revising down and we think that trend will hold and more cuts will be made out of May and June while July and August are already so low there really isn’t any room left to cut.
NP loads are up 1300 MW week on week while SP loads are up 2700 MW, week on week, for hour ending 17.
Note the hourly shape has changed in yesterday’s loads versus last Tuesday; this is due to strong AC-driven demand offsetting the distribution-side solar; where peak occurred on hour 21 all of last week it is now happening on hour 17 … blame it on the ACs.
Phoenix will breach 100 today but then is set to plunge into the mid70s, a 25 degree swing; something similar, though less extreme, takes place in Socal:
Palo loads have risen, up 2100 MW week on week, and will go higher today off of that century mark, then they shall plummet back to the 9k zone and congestion may rear its ugly head yet once again:
MidC loads warrant a comment, not because they are up, or down, just because they are showing the tell tale signs of the transition out of the heating season:
Note the hourly shapes last week and the morning peaks and contrast those with this week and the evening peaks: heating load set peak last week while a loss of heating load in the morning, and some AC forced the peak to evening. Interesting, huh? But focusing on loads at Mid-C is like obsessing about which brand of corn dogs they serve at the Super Bowl; it just don’t matter, only hydro matters and things are getting more bullish in the northwest as the refill season kicks into full gear; case in point is Coulee:
Thar she blows, forebay that is, gapping up nearly a foot as BPA cuts outflows – and prices rally. That trend is the new May reality as inflows above Coulee tighten and the rate of refill increases and downstream the spill continues. This northwest heat has become a non-hydro event – no surge of newly melted snow; Kalispell in the 80s and the rivers are dropping.
One other factor, wind, is worthy of mention as there is no wind now, nor for the last few days, but the northwest will soon see a change and all of this bullish sentiment, at least in the short term, most likely will blow away:
That is the northwest, the ISO wind outlook is more bullish:
As most days typically are, there are some bullish signals and a few bearish ones but overall the WECC is amdist a sustained bull run that shows little signs of dying anytime soon. In fact it might be a good time to revisit that market call one of the Ansergy’s pundits made back on March 1 … it went something like go long Q2 and walk away. Let’s see how that call has played out for June:
From a heat rate perspective seven of the eight outrights are up while all the power prices are up; May is even more dramatic at MidC. But that run is not over, we think, and we would remain long in June, but not everywhere.
June Trade Ranks
We still like NP June but might be a shade biased towards the off peak over the on given that the California runoff is over and the rivers are falling and despite the 1.5″ of rain that will fall over the weekend.
Like NP we are leaning more towards owning the off over the on given the strong rally in both but the forecast suggests there is more juice in the off. Owning either was the right play but, if you can’t be long everywhere, we’d consider taking SP profits and go into a wait and watch mode.
Cant find the love for PV any longer, the rally killed that sentiment; its like the girl who shows you too much attention and smothers your attraction towards her. Palo June is over for us, we’d short the June on peak given a 25 degree drop in temperature over the weekend and the eventual return of the nuke.
The hardest hub in the world to forecast, MidC is; and spring is the hardest season to forecast MidC; and 2016 has been one of the more challenging years to model MidC. But that whining aside, we see no reason to take any length off of June, what with water tightening and loads as low as MidC loads can go, and refill season commencing, and spill a spilling, and the friendly trend is in our favor, and we always want our book to look like BPA’s and they are going to find themselves a lot less long than they normally would see for May and June.
One other trade, the July-June SP on peak, caught our eye this morning:
Since we don’t really like June SP, and we don’t like this gapping roll, we think a July SP short is in order. The forecast began March bullish, relative to the market, then that market woke up and has gone on a six week rampage and has now blown past relative value rendering this roll border line stupid. Some of this July over June sentiment is Cal hydro driven, the thinking is along the lines that June will have big water on Big Creek, but those 90 degree days in the Sierras should have washed away that sentiment, though the above chart suggests otherwise. We also see a very tight June MidC and, though the DC is only rated at 3000 MW, the virtual DC is infinite and we feel some of that northern bullishness will be felt down south.
