Good Morning,
Trump can’t help us in this market, only Mother Nature has the power to power up the Mid-C and she is still a week or so out from even trying. Meanwhile, the hub is awash in the backwash of October’s record washout, PV3 is back, loads are poised to tank in the south, and gas remains weaker than the outlook for Clinton’s Foundation.
We noted that while the DOW futures were tanking in anticipation of the unthinkable – a Trump Presidency – the EIM had a different reaction:
Maybe it wasn’t Trump, maybe it was the passing of California’s weed legalization? Maybe it was the heat in the ISO?
That heat (mid 90s) rallied the day ahead LMP markets up $17.00 but it didn’t help the spot gas markets:
Those markets shrugged off Trump’s victory and mostly settled lower, except for PG&E which saw a $0.03 rally.
Palo Verde
The news at Palo is the return of the nuke, just in time for the return of normal temperatures.
Not only does the lingering heat fade away there are a few days where temperatures are below normal and at that time the hub will realize it’s season low demand:
Loads are up slightly, week on week, but that won’t last, next week they will be off 1000-2000 MW.
It is worthy to note how much higher this year’s loads are than last, higher across almost all hours.
Rockies to Palo Trans Flows
We also observed a 1000 MW change in interchange flows between the Rockies and Palo, most likely in anticipation of the return of the Palo unit. Interestingly, we saw just the opposite reaction coming from the Great Basin:
There we see an increase in south-bound flows suggesting the Rockies cut may be more demand driven than supply. The market doesn’t really like Palo either:
And while the forecast ticked up the market sold off resulting in a $1,89 delta which is suggesting a possible buyback of our short position.
SP15
The news at SP is not Trump or the legalization of dope, it’s the big load rally realized yesterday:
Three thousand MWs of load, week on week, driven by the surprise heat. But that too shall pass, as temperatures are poised to plummet:
Not cold, just normal, but that will be all it takes for the hub to give back that 3k rally. Offsetting weakening loads are some new gas units that have come off line:
Mountainview is almost completely off-line now, as is Walnut Creek. The hub doesn’t really need the units now that loads are reverting back to winter lows. The market shrugged off that heat, though heat rates remain fairly robust for BOM:
We were long this and, despite the forecast being over the market, we are having second thoughts about that length, but more on that in the conclusions.
Mid-C
Mid-C is a long ways from becoming great again, unless you are short bom. The October water just won’t go away, flows are strong into Coulee, especially on the Pend Oreille:
You know there is a lot of water when the spill is higher than the turbine discharge, as it is at Albeni Falls. We also noted a big release of water on the Kootenai:
In the last 24 hours BPA has taken outflows from 4000 cfs to 19000. Now the Kootenai and Pend Oreille combined will be putting over 50k into Coulee, which is functionally full, resulting in continued downward pressure on the hub. The only thing that can make Mid-C Great Again is some cold weather, and there are slight hints of that happening:
But not for another week, and then it doesn’t get cold, just normal, but normal is all the hub will need to add another 3000 MW of load by mid-December:
Will that make it Great Again? Nope, not unless the water situation dries up and by the looks of the precip foreacst there may be another storm in the works 15 days out – too far into the future to bank on, too close to ignore.
Meanwhile the River Forecast Center is trying to make Mid-C Great Again:
Those are big cuts from previous forecasts but are in line with the current STP. The dry weather is catching up and things will tighten, as long as that storm stays 15 days out. Most do, some become reality, we will be watching it.
Gas noms are off:
Driven mostly by Grays Harbor, but with a return of load and overall drying noms should be poised to rally in the next few weeks.
The market hates the Mid-C, it doesn’t think the hub will ever be great again, at least not great in November 2016:
We agreed, that is why we puked out our length on Monday, looks like that was a good call, but now the market looks so cheap its tempting to put that length back on. We note the eye popping $3.90 change in deltas and have no choice …we are buying the Mid-C again.
Conclusions
- BOM
- Palo
- We are buying back our shorts, the Palo unit is back and priced in, the hub is mired at a floor, there is no point in tieing up Var on something that is going nowhere …. Flat
- SP15
- We were long in front of the heat, that position wasn’t great, again, but we don’t see anything (aside from gas outages) to excite us …. selling the length and going … Flat, again.
- Mid-C
- MidC is great again, in our eyes, because it is
- Cheap
- Drying out
- Cooling off
- and we are going long, isn’t that great?
- MidC is great again, in our eyes, because it is
- Palo