Good Morning,
Market comes back strong off of heat in LA, troubles at a Diablo unit, and River Whipsaw Center reversals. Just another day in the WECC.
Day Ahead LMP
Up $23.00 on the peak hour (HE19), week on week. More telling is how little congestion at the Mid-C node:
Post Apocalyptic Storm of the Century one would think the Mid-C would be lucky to post a $20 handle but one would be wrong, the hub has shrugged off the seven inches of rain and is now back to trading at pre-storm levels. And now it looks like it might trade above those levels if you believe our buddies in Portland:
Why wouldn’t you believe them? They have pretty much posted every possible number between zero and infinity, one of them is bound to be right. This latest forecast (yesterday’s 10 day) shows some rather severe, or dramatic if you prefer, cuts across all ten days. Glad we went long on Monday, did you?
Everything is up but that 25% rally at Mid-C puts the hub back to the same levels as two weeks ago, pre-storm, though the light load is still weak but that too should rally as the water works its way into the ocean.
Everything is up though PG&E Citygate is up the least, though the term spread has widened. We’re staying short those shoulders but haven’t done much with it.
Demand
NP is off but and that trend will continue as the a/c loads falls away and ambient air becomes the hub’s new hvac system, at least for the next several weeks:
Great late season cooling load but that ends at week’s end; I guess you can call it the end of summer as the hub drifts into cool normals.
Mid-C Actual Demand (13 Balancing Authorities)
Yesterday’s peak was in the evening but we found it interesting that the morning peak, week on week, was off 2000 MW. The forward-looking outlook at the hub is considerably more bullish than NP:
Mid-C Demand Forecast – On Peak
The hub is officially at the demand bottom, its all uphill from here til Christmas, don’t expect to see those teens in the spot market again unless we get another Mother of All Storms, again, which there is no sign of that in the 21 day outlook.
Mid-C Composite Weather Forecast (5 Cities):
Two points to make with respect to today’s weather forecast:
- Next week will see the season’s first strong heating load
- Projected precip is above normal for the next ten days
Both of these push our outlook for Mid-C in opposite directions but the bearish precip is more than offset by the bullish demand and we remain Mid-C bulls.
SP15 Actual Loads (SP ISO + LDWP + IID)
Loads are just sideways at SP, which is surprising given the mid 90s yesterday and like NP, it’s all downhill for the next several weeks:
Like really downhill to the tune of 3000 MW of lost onpeak load. Throw another 2000 MW of DC energy that is about to return and you have a nice bearish brew a brewing at SP.
Like San Jose, Burbank is hot and than not. Back to struggling to reach a low normal for the forseeable future; hard to get excited about SP length, though outages may offer some hope, or not.
Off 1000 MW, will continue to fall off another 3000 MW and then will start to rally as temps cool into heating load:
Hot than not but those dips below normal in the 11-15 actually kick out some heating load but just as the a/c load falls to the wayside that darn nuke is going to come back …not loving palo any more.
Hydro
We already led with our big hydro news of the day …the whipsaw forecast by the RFC. Not that we disagree with their outlook today, we just disagreed with it’s Monday outlook, now it is more reasonable. So what happened to all that rain? Let’s go to the reservoirs for therein lies the answer:
California:
Though Shasta and New Melones show drafts the rate of draft is much lower than last week and all the other reservoirs show builds, and note total storage is double what it was in the previous two years.
BC Reservoirs
No draws in BC, just builds. Though BC is well ahead of last year’s levels it is way behind the next three years (2012-14). Call it a modestly bullish factor.
Mid_C Reservoirs
Only builds here, except for Lake Pend Oreille. So that is where all the rain went, it went into the reservoirs. Well, not all of it, some is in the rivers:
Mid-C Rivers
Check out those flows on the Willamette, our bold prediction of a 50k handle came pretty close to reality. Every river is up but they will slowly fade as this water works itself through the system. Our takeaway is three-fold:
- Reservoirs captured much of the preicip
- Prices didn’t come off that hard
- The forward outlook for Q1-Q3 17 is more bearish, albeit slightyly
BC Rivers
Unlike the Mid-C, the stations on the Columbia are off in a big way; check out the cuts out of Arrow. Some of that is offset by massive increases in the smaller rivers, mostly run of river.
California Rivers
Big increases in most Cal rivers but with dry weather forecasted those will fall back.
Generation & Trans
Diablo #1 is running at 50% and PV3 is off for refueling as the ISO kicks off the fall outage season:
Note the near doubling from a month ago in total outages.
After backing off the nuke and hydro the “doubling” seems less impressive, especially when you look at what has come back online:
Mid-C and SP are down, week on week, while the other four are up. Everywhere is off, year on year, except Great Basin. Those numbers are going to plummet starting next week.
Trans Flows – Midc to BC
We post the northern intertie chart not because of the extremes (big buying or big selling) but because of the very small amount of energy that has been moving across the line. Apparently prices weren’t cheap enough, or high enough. I think this speaks volumes towards the underlying strength of Mid-C and given the return of the DC in 12 days we are increasingly liking the BOM, and possibly the Nov.
Conclusions
- BOM
- Mid-C
- We like owning this, not just because we are in the black, we like that too, but we think there is little downside left here given an expected rally in loads and falling hydro ….LONG
- We would also cover the off-peak short put on with the spread last week.
- SP15
- We’ll stay short off of falling loads and recharged rivers/reservoirs and overall weakness in all the adjoining hubs
- Palo
- Staying short off of falling loads
- Mid-C
- Nov
- Mid-C
- Long off of the DC returning and a probable 3k of new loads
- SP
- Short off of the return of the DC and a probable 3k loss of loads
- Palo
- Flat
- Mid-C
- Q2 Mid-C
- The market has pounded this product and now it is relatively cheap. Sure the water outlook is more bearish than it was two weeks ago but it is just “slightly” bearish and that marginal water doesn’t warrant a sell off of such magnitude. We will go long in the Q2 off of strong cash over the next three weeks and the market’s silly tendency to positively correlate term with cash.