Good Morning,
Awash. Awash in water, awash in gas, awash in cheapness. Awash.
There, we said it, the market is bearish but as the pundits say, the best cure for a bear market is a bear market. Price it cheap enough and you can be long, not because you are bullish, but simply because the downside is limited. Such is where the state of the state sits today.
Spot gas was destroyed yesterday, as in carpet bombing from a 1000 B52s:
PG&E Citygate led the way, dropping $0.42 in a day. Black Tuesday, the day the headfake gas rally ended:
Unfortunately, there is another saying, “the best cure for a bull market is a bull market” and we see that in play with gas. Just as the E&Ps sniff hints of decent prices, as they dust off their drills, BAM, back to the future, their hopes are flushed down the toilette.
Spot Power took a step back, too, but nothing like gas, which caused heat rates to gap:
MidC actually went up; up in the face of a $0.30 drop in gas prices, and it is not because there is no gas on the margin, there is a lot of gas on the margin:
Meanwhile, back at the Energy Dysfunction Market, we saw another day of strangeness:
What we love about these 5 minute ticks is they are about as random as a photon; like Heisenberg’s Uncertainty Principle, if you stare long enough at the market you’ll make it move. So yesterday had a string of five ticks (9:10 to 9:35) all north of $900/mwh; while the day before, a few minutes later there was also five ticks, but these were all negative prices. We can just picture some Berkely PHD student writing his thesis on this market and trying to come up with the math that explains it. Good luck!
Day Ahead LMPs are more sensible, and these are off week on week:
And now the market has a clear dual peak, though the evening is setting the highs.
Palo Verde
Loads are starting to crumble back to reality in the deserts:
And there is more pain on the way, loads at PV will revert back to last year’s levels, but the warm weather just won’t go away, at least not for another ten days:
More days above normal but at the back end of this 21 day forecast there is below normal, that will be a first in about eight weeks. Still too early to bank on but its there and those days will mark the bottom of PV’s loads. Around that time we should see PV3 return to service. Hard to love being long, the major driver for an opposite sentiment is its awash in cheapness:
But that is a scary chart to build a long position from; the forecast is tanking, the market is tanking …and you want to step in front of that freight train? Be our guest, we won’t; we’ll sit by the tracks and watch the longs get splattered. Still Short.
SP15
Loads dropped week on week, but not by much, the hub’s load pain is almost over.
We are projecting another 500-1000 MW of load decay before the bottom is touched:
Though we think the price pain has been realized (at least non-gas related price):
Water is not an issue, California is going dry, and there are lots of new outages, rendering our forecast for prices pretty much flat for the next several weeks. And like Palo, the market has sold Nov SP hard:
So has the forecast but it still remains slightly above the market. Given these low prices and our expectation of a solid floor we would be tempted to carry length at SP for BOM …and so we shall.
Griffith took down one of its units resulting in another 370 MW offline; aslo some major work underway at Big Creek but that doesn’t count, there isn’t any water to run through the turbines.
The DC line is starting to fill:
But all of this is priced in and unless the rest of the WECC goes into cardiac arrest there just isn’t a lot of downside (non-gas) left at SP …we are long.
Mid-Columbia
The news at this hub is all about water and will remain all about water for another eight months, if you don’t like reading about water skip our Mid-C sections because they will always be about water, even if it is very cold it will still be about water. And there is a lot of water, water everywhere, literally AWASH in water.
BON is well abvoe its three year highs; yesterday it averaged 150 kcfs, and this making everyone long, especially BPA:
Contrast BPA today versus two weeks ago: 17kmw vs 10.5kmw; the feds are awash in energy. Avista is long too, 300 aMW higher today than two weeks ago. Its plants on the Clark Fork are flirting with hydraulic capacity, so are the stations on the Pend Oreille. Natural river flows are rocking, we like using our side flow indexes to measure those:
These indexes measure unregulated inflows into the mainstem Columbia and Snake; it is this water that confounds the hydro operators. Looks like it is really confounding Chelan:
Whoa, 113k spill at Priestand its November, not June. You can argue “hey, its Vernita Bar”; argue away, but 10 of these 12 days in the chart had no spill and Vernita min flows were at play on all those days; nah, its not Vernita, its “awashness”.
Mid-C Composite Weather Forecast
The top plot is bearish, not a bullish sliver of temperatures in that, every day for the next 21 days is above normal rendering no relief via loads, but it is the bottom plot we think is more interesting. The northwest is going dryer, if not outright dry:
Seattle is projected to get 1.5″ of rain over the next ten days, that isn’t dry, but its below normal; in fact every city is below normal except for Pendleton. The bigger point is the wet cycle has, at least for today’s forecast, reversed itself. Gravity will take care of this awashness if you are patient. Even the RFC is having modest second thoughts about its outlook:
Emphasis on “modest” but still, nearly every day in its ten day is lower than the Monday’s STP. If the dry continues expect some more backdowns, we are. While on the mantra of hydro let’s look at WYTD precip:
Those are % of normal numbers, and all are off the charts. Most cities in the northwest realized record rains in October and that explains why the hub is awash in water, but doesn’t explain why the RFC put 1200 aMW into Jan and Feb, because the snow does not support that:
Those are all negative anomalies, there isn’t a snow basin in the northwest that is above normal. Sure, it is early in the year, but facts are facts and the fact is there isn’t much snow out there and there is not much coming in the next couple of weeks. You would guess that if you were blindly using the RFC’s water supply forecast:
Kootenai at a 112% of normal when the snow anomaly is below 100? Really? It goes to show the high precip weight the RFC deploys, we think too much weight is given to precip. It would be one thing if the reservoirs were at all time highs, they aren’t:
There is an extra MAF over last year but levels are identical to 20013-15. All of this we offer up because there may be opportunities to fade the selloff, though don’t expect any relief in the near future:
The Ansergy price forecast just goes sideways for the next few weeks but that suggests a floor. The only way that floor gets knocked out from underneath you is water, the northwest needs lots of new water to push gas off the margin:
And by the looks of the genco’s noms that isn’t happening today. So we can rule out water, at least per today’s forecast, as a factor in a subsequent price collapse. We know demand isn’t going anywhere off of today’s forecast, but that can change fast. We like cheap and both bom and dec are now cheap:
We have no choice to keep our length in bom and we will buy back our dec shorts and go long there, as well.