North vs South

Good Morning,

Plenty of mixed signals but in total feels a shade more bearish than  earlier this week primarily off of crashing Socal temperatures and another mini-wave of rain.  WECC loads are poised to drop 5-6000 MW before rallying into the heating season, but will take another six weeks to get back to where we are today:

WECC Daily On Peak Load Forecast

001_weccloads

All of these cuts are in the south (SP, NP, GB, and PV) while the RM and MC are poised to realize demand increases off of heating load. As a consequence, we remain bearish south and “relatively” bullish in the north. Let’s start with the bullish and work our way into the bearish, or at least how we see things.


Mid-C

The demand forecast says it all:

001_loadfc_mc

Rock bottom is where the Mid-C is at today and upwards and away shall its loads rally.  Plus there are some hints of cooler weather in the outlook:

Mid-C Composite Weather Outlook

001_wxtempsmcn

Where today is several degrees above normal (bearish) the kick off Nov deliveries drops back to normal which is worth a few K of inc loads. We added the precip outlook because precip matters almost as much as temps but this outlook has turned a shade more bullish, most of the last few days of expected rain has faded, though we suggest our attention should be directed towards the 15-21 day storm to see if it holds, we doubt it, they rarely do, until they do, like the storm last week.

Another bullish turn of the screw is the RFC’s 10 Day Forecast:

001_rfc10day

They (the RFC) have dramatically reversed its bearish STP outlook by shaving 1000 to 2000 MW across the ten days.  We like that for our virtual length, coupled with incremental demand, coupled with the return of the DC and the uprates on the AC …makes for some nice coupling.

Offsetting that bullishness is the reality of rallying streamflows off of that aforementioned storm.

001_riversmc

All of the Mid-C westside is at, or near, hydraulic capacity and will stay so through next week, but just as the weather cools that energy will fall off, so call the near term water a head fake, unless your sole position is Bal Week.

A couple of other stations are worth mentioning:

Willamette 

001_riverswill

That POOMA forecast of 50k we threw out there two weeks ago nearly became reality, the river crested at 45k. We are also seeing a spike in the sideflows at the Middle Columbia :

001_riverssode

Interesting that there is such a delay from the big storms to the index posting its rally suggesting much of last week’s event went into the soil. This index will fall  of next week but doesn’t help things for the next few days.

BC Hydro isn’t helping things either, they are mostly on the sidelines waiting to pounce:

001_transflowsbc

That chart is remarkable for how unremarkable it is.  Meaning very low volatility, meaning there must be a serious game of cribbage going on in Vancouver.  There isn’t in Houston, Calpine put all its cribbage playing employees  back to work as it fired up its Mid-C generation, apparently seeing the same thing we are:

Mid-C Gas Noms

001_gasnomsmc

We also took note of a slight change in the AC TTC plans:

001_ttcdc

Doesn’t help the BOM position but bom is about done, time to start thinking about novy, that is what we are doing.


NP15

Sacramento Min Temp Forecasts

001_wxtempssac

Lows are poised to drop below normal which should jack off peak loads but offsetting that glimmer of bullishness is another strong storm system set to recharge the rivers, just as they are fading back to normal.

Diablo #1 is running at 50%, not sure what the story is there, but the story in the ISO outages is one of paint drying:

001_calisoout_np

Aside from Sutter, there are no major gas units off line, just a lot of hydro that typically would not be used anyways, though with the last storm plus the mini-storm approaching some of those units might have ran. The renewable outlook is modestly bullish but more irrelevant than anything else, just not enough MWs to make much of a difference:

001_renew_np

What was bullish was the heat in LA and its impact on the ZP energy:

001_transflows1526

SP pulled hard which did more for  NP’s price than anything NP could do for itself, but that too shall pass  as the southern portion of the state cools down.


SP15

Burbank, CA

001_wxtempsbur

By Monday she struggles to reach normals, a drop of twenty degrees, rendering a very bearish demand outlook:

001_loadfc_sp

Contrast SP with Mid-C, one hub takes a dump, the other reaches for the stars; the spread blows out from 4k today to 11k by the yuletide.

001_loadspread

But that isn’t news, it does the same thing every year, but the difference this year may be the growing renewables in SP versus a much smaller increase in new generation at Mid-C.  Plus Washington State may slap a carbon tax on that will rally that state’s prices, or at least increase the load factor of the Oregon generation.

Gas Noms remain relatively weak, especially when compared to a year ago:

001_gasnomssp

Off about a half a “B”, year on year, and set to drop even more as loads fall to the wayside. Renewables are as well, though not massively, but are slightly bullilsh for next week:

001_renew_sp

Another bullish factor, which is really bearish from a term perspective, are the gas outages in the hub:

001_calisoout_sp

Lots of big units off line which puts the current year status ahead of the last three years which comes back to our point – going forward you should not expect as much incremental gas to come off line as you did last week, call it bearish.

Major Gas Units – SP15

001_calisoout_spa

Toss in one more fact, call it the return of the DC, call that another 2000 MW of instaneous capacity chasing any sign of bullishness, then call it a dismal outlook for the hub, that is what we’re calling it.


Palo Verde

The hub refuses to cool off, at least for the next few days:

Phoenix, AZ

001_wxtempsphx

The forecast for next Thursday is seven degrees warmer than Wednesday, the heat is resilient.  But all good things come to an end and PV’s late heat is going to fade as will its loads:

001_loadfc_pv

Dropping 2500 MW on peak over the next couple of weeks then a mini rally into Christmas, but hasically the hub is done as for any voltility; plus throw the nuke (PV3) back  into stack and …forget about it, PV is toast.

Gas Noms remain relativly strong as the hub remains hot, expect those to fall to the way side after next week:

001_gasnomspv

One other thing caught our eye, this morning, that we wanted to share. Check out these transmission flows in and out of Palo:

001_flowspvtorm 001_flowspvtogb 001_flowspvtosp

The hub has become a sink of sorts when compared to flows a year ago. The Rockies is exporting 700 more, Great Basin is importing 400 less, and SP is receiving 700 less, as well.  No real explanation, perhaps its the changing renewable outlooks in those adjoining regions, maybe its the unseasonably warm weather of late.  All we know is its real, those are actual Balancing Authority flows.


Conclusions

If you read the above you already know what our conclusions are, for those of you that cheat, or are lazy, and skip to the end we are:

Bullish North, Bearihs South.

Our Risk/Reward Matrix reinforces that takeaway:

001_riskreward

We like this report because it summarizes the relative strength of each hub for on and off peak.  For those that don’t know what this report is, let me explain. Ansergy tests every forecast with ten different scenarios:

  • Five bearish, each 500 MW of lower loads or higher supply
  • Five bullish, each 500 MW of higher loads or lower supply

We then compare the price forecast of each case to the base case, compute a delta, and in the above table, we return the average of the ten deltas. A negative number implies more downside than up – assuming the probability of each case is equal, for simplicity’s sake we do assume equal probality.

Risk Reward Observations

  • NP is the most sensitive to downside changes
  • SP much less so, this just reflects each hub’s relative stacks for those periods
  • Mid-C is the most bullish for Nov-Jan of the traded hubs, again due to its position in the stacks. Clearly, it sits on bullish inflection points.
    • 001_stackmc

On to our market calls….

  • BOM
    • SP15 – short
    • Palo – flat, maybe long
    • Mid-C – long
  • Nov
    • SP – short
    • Palo – short
    • Midc – long
  • Dec
    • SP – short, but nervous short as we fear Aliso effects on spot gas once the heating season starts
    • Midc – long
  • Q1 & 2
    • Midc – long because we are long in the front and the market has pounded both