Good Morning,
Summer is going out with a BANG in California with the long-slumbering Bay Area approaching triple digits and LA well north of 100 for highs today. The rest of the WECC looks on in envy at the $1300 prices posted in the EIM …if you’re outside forget about getting any of that love, it’s all an ISO Only game. In other words, if you need energy (PG&E, SCE) you’ll pay the $1300; if you’d like to sell (Nevada, and both Pac’s) you’ll get about $50, or possibly pay the ISO for the right to serve their load (PacWest).
ISO hubs (NP and ZP) posted highs of $1330 at 7:30 pm yesterday, contrast those prices with the outsiders:
Nevada Power collected $240/mwh on that tick (7:30 pm) but PacWest faired less well paying the ISO $16/mwh for the right to keep the lights on. What a market!
Today’s is starting out just like yesterday’s:
Not that we expect the evening peak to match yesterday’s bizarre price behavior, maybe it will be even more bizarre?
Spot Gas remains fairly bullish as we enter the last month of the injection season:
The spread between PG&E and Socal is sporting a low $0.40 handle but as temperatures cool back down later this week that spread will push back to the $0.50 handles, yet gas remains strong and is in sync with last year’s prices.
Day Ahead LMP
The DA LMP is up an impressive $24/mwh, week on week, and no congestion between NP and SP to speak of; hardly any at the MidC either, but Palo lags way behind:
Weather & Loads
NP’s loads were actually off, week on week, but well above the levels seen Wed-Sat and should be much higher today given it is a biz day.
SP’s loads were down slightly, week on week, but like NP above levels seen at the end of last week, and that is for a Sunday; with temperatures expected to breach 100 today we’re thinking possibly another 5k over yesterday.
Palo and MidC also showed drops, Palo is off 2k, MidC a more modest 600, and don’t plan on either moving much for the next several weeks … Summer is over and, until it gets cold, loads are going nowhere at either hub. And it is not getting cold, either.
Very pleasant, quite mild, and downright bearish. But wait, you say, those are cold anomalies next week, right? Wrong:
Min Temps during that period are above normal, Max Temps are below normal … its the dog days of October. But one indisputable bullish factor for MidC, albeit modest one, is the dearth of precip …there just isn’t any in the 10 day outlook. Should such trend extend through the coming month it may make Nov-Dec worthy of some length, but no big precip for all of Oct is a stretch.
That hint of heat in Friday’s forecast has been replaced with more days of below normals and that normal is rapidly declining and so are any hopes of seeing a Palo rally, it’s mired in the October doldrums just like the MidC.
Can anyone say “Santa Ana”? How about those 19 degree day anomalies LA will realize today, and there is a slight build over Friday’s forecast.
The Bay Area dropped the ball this summer; whenever LA got hot the Bay got not, but not today, the bay is hot at the same time LA is hot. Check out those 97s in San Jose, a new 10 year high for the day.
Transmission Flows
On most hot days this last summer Path 26 pulled energy out of ZP but not yesterday because NP had such strong demand, don’t expect any energy flowing south today, either.
Do expect more energy flowing south out of Canada, however, as BC chases these robust ISO markets:
Exports to MidC hit highs of around 1800 MW on hours 20-21 and most likely will do the same today. The MidC doesn’t need that energy so its loaded onto the DC:
A couple of points to make on this line:
- The peak flows lasted just an hour yesterday, contrast that with last week where the peak lasted 4-5 hours
- Note how little energy was flowing during the solar hours; the ISO had every gas unit fired up and ready to meet the evening peak and found itself awash in energy in those solar hours.
Generation
The Palo Nuke unit is back (PV3):
We had it down for refuel in mid to late September, now it looks like that work will be done in October which will coincide with all the rest of the planned maintenance for that period.
California is fortunate that this heat wave didn’t come a few weeks later as there would have been another 6000 MW of capacity off line. Current total outages are around 6k and will be 12k by the end of the second week of October.
There were few changes in outages over the weekend but as we already said that too will change over the next couple weeks. Total outages actually were down today versus last week, no doubt the ISO told the Generators “Don’t even think about taking anything off line” given the hot CA temps.
Hydro Update
We are seeing a bit less water flowing out of Canada than last week:
Most of those cuts are coming out of Brilliant; doubt we see much change over the next several weeks, water is locked in until WY17 starts to build. Coulee has just about reached its refill target of 1283:
Call that bearish as all water in will now be water passing through the turbines. The RFC has turned a shade bearish, too:
We prefer comparing the 10 day to the 120 day (STP) and note that all days are higher than the STP which should bode for a slightly bearish forecast today but suggest you check out today’s 10 day when it gets published in a few hours. We are also seeing Lake Pend Oreille drafted which is putting nearly 9k of new water into the Pend OReille River:
9k is material given that inflows into Coulee are around 60k. California water remains mostly dismal:
The Pit is flowing like it did during the drought years and this is coming out of an El Nino; in fact the Pit is flowing less than it did in the last five years. Not true for Shasta with its reservoir the fullest it has been in those last five years. Net water is slightly higher than the recent years but the amount of energy is negligible. A good breeze, or lack thereof, wipes out the effect of any incremental hydro energy. Call it a non-issue.
Price Forecast
We found this chart to be interesting for a couple of reasons:
- MidC is about to fall off of cliff once the DC goes down
- Palo shows zero volatility over the next 40 days
- SP comes off fairly hard but NP doesn’t budget and is clearing at a premium to SP in the model
Conclusions
- Oct – we’re done with Sep, it’s bal week and will liqudate whatever residual positions we had today
- MidC
- What’s to like, the market is over the forecast, we think we’ll see a bearish STP today, loads are going nowhere, nor is hydro …………SHORT
- SP
- Was long going out of next week, market and forecast both up a tick or two, like the draws on Socal storage and see signs of possible more heat first week of Oct ………..LONG, unless you’d rather carry ISO length at NP
- NP
- We would, but will keep length at both NP and SP; loving this fat (or phat, if you prefer) deltas between the market and the forecast. For ever and a day the market traded at a massive premium to the forecast, then it woke up, but now we think it has blundered again and oversold …. we are, therefore ….. LONG
- Palo
- We should be long here too given the market vs forecast deltas but can’t be long everywhere, can we? Why not, we have infinite VaR, we like all the outages coming to Palo ….. LONG
- Nov-Dec Roll
- MidC
- Easy call here, we’ll own the Dec over the Nov; both are buys in the model but the Dec is more protected from what we expect will be a weak Oct, but this is nervous length and our eyes will be glued to the precip forecasts while we carry this position, though big Oct rain will only help it.
- SP
- We don’t have much conviction with this one but would own the Nov over the Dec just because we prefer fading rallies and if you like the Oct then the Nov will correlate higher to any good suprirses in cash …. Short the DEC-NOV
- Palo
- Same sentiment as SP, we will own the Nov over the Dec as much off of an over-bid Dec as anything else.
- MidC
- MidC
These Nov-Dec sentiments also conform to Ansergy’s Risk Reward Matrix:
