Cooling

Good Morning,

Winter looks like it is finally arriving, not that it is cold, it’s not cold, but it’s not crazy warm any longer.

All hubs are cooler than normal, except the Rockies, which is just a degree above normal. Bear in mind these same anomalies were 4-6 degrees above normal last week. It is cooling, and with cooling comes changes in loads.

Mid-Columbia (13 BAs)

The hub rallied 1800 MW, week on week, on the peak hour. Nothing to sneeze, nor sneer, at. But, alas, the hub can’t seem to stay cold, weather is warming over the next set of days, almost for all of BOM, rendering bom a bomb if you’re long.

Mid-Columbia Composite Weather Forecast

Tale of two circles. The red circle highlights the warming trend that has crept into the forecast over the last five days while the blue circle points out a potential material storm that has slithered into the discussion. This storm is not biblical, but it’s material and lands at the same time weather reverts back to cooling, rendering a bullish outlook for snow, which is bearish for the back-end of the curve.

Yet we digress, once again, let us finish the cooling trend by examining loads and weather in the rest of the hubs.

NP15 (Cal ISO + BANC + TID)

Off 600 MW, not a big deal, but the salient fact in northern California is that loads are poised to rally off of cold weather:

Sacramento, CA

And it is getting colder, temperatures are projected to check in 5-6 degrees below normal for the next couple of days which should put some upward pressure on the morning peak, that range of hours where solar is still in the dark.

There, that is the good news, the not as good news (for length) is the hub is poised to get rained on:

To the tune of 1.34 inches of the wet stuff and the California rivers will rally once again; nothing like what happens further north when it gets very wet but there will be more hydro energy and a lot of this is going to come down as much needed Sierra snow. Heavenly might be heavenly.

Socal Loads (ISO SP, LDWP, IID)

Ouch, down 2100 MW, week on week, but get used to it, this is the new normal for SP15, those positive year on year anomalies we saw last week are gone for the time being, the weather outlook for LA is cooler to downright chilly. Go long faux fur.

And unlike her sister hub, NP15, SP15 shares not in load love from cold weather. 

OK, maybe you can expect some heating load, maybe 500 aMW on peak, but probably not from what is in today’s forecast. What you see is what you get for the foreseeable future. Rallies in SP will come from one of four sources:

• Rallies in neighboring hubs
• Outages
• Dysfunctional Markets
• Natty

Speaking of natty, we are seeing a mini-rally of sorts in the spot market:

PG&E Citygate is flirting with last year’s levels but the rest of the hubs are lagging, though all are up from their Friday lows. Note the spread between PGC and Socal Border … cash traded $0.65/mmbtu; off the charts bearish for SP, great for the long NP-SP bom and dec.

Palo, too, suffered some load decay, week on week:

Off 700 MW as it is now finding its bottom, the load pain at PV is over:

The hub should expect average on peak to climb around 600 MW over the next five weeks. That is about all that is good in PV for the next ten days:

Though there are hints of late bom/early dec cold weather which will deliver that 600 aMW rally.

We noted that snow levels picked up over the last few days:

Basin level composites (made up of one or more river basins which are made up of one or more snow pillows) have all ticked up off of the storm that blew through the northwest the last couple of days. The anomalies on the Spokane and Coulee almost tripled, but they were so low a single snow flake might have doubled them.  Point being that the snow anomalies are rising, not falling, and that is bearish. So are  the recent precip changes:

These are year to date cumulative totals; check out Seattle. Nearly 20″ since Oct 1 and over the last day it added another 2″, though not much made it over the Cascades – Kalispel bagged 0.3″ but all of theirs came as snow. More is on the way:

The water supply tide has turned, where it was ebbing last week it now is flooding this week and our Portland Pals are jacking up their 10 day:

Most days in this outlook are 300-500 aMW higher than Monday’s STP, we think that trend continues as long as the hub stays wet.

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Conclusions

• Mid-C
  • BOM – still hate it, market likes it more than we do, we’ll stay ….SHORT off of big rain realized and big rain coming and a bearish warming trend over next week
    • 
  • DEC – market hates it, forecast hates it, we like it … off of weak prices, hints of cold in the 11-15, and a need for an off-setting long agains the short bom
    • 
  • Q1 – Forecast is over the market, we don’t like the expected snow builds, though they won’t get back to normal in the next ten days, but we do like the cheap prices and are highly confident there will be one solid cold snap between now and Christmas. Fundamentally Q1 could become a train wreck if it stays warm and wet, for now it is insulated by bom and dec, somewhat, and we’ll take our chances and go ….. LONG
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  • Q2 – no matter how you dice and slice it, the snow packs in the northwest are way below normal. Granted it is so early in the water year that you could safely ignore snow levels today because they are guaranteed to change, materially, several times between now and March 1, but we choose not to ignore them and like the low prices and are ….. LONG
    • 
• SP15
  • Dec  – market likes it more than the forecast, we don’t see any fundamental reason to like it, and will be …. SHORT … partialy to offset the Mid-C length, but we’d short it naked too.
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