Vivisection

Good Morning,

The WECC survived the mighty cold front, the Siberian Express of WY17 has passed and the lights are still on. Perhaps the only casualties will be the longs that didn’t sell the facts. All that is left to do, now, is to disect (vivisect) how the west managed the event, because the event is over; if you didn’t earn your Maserati on Mon-Tues be resigned to spending the rest of the year behind your 72′ Ford Pinto. There is nothing out there to get excited about, aside from a massive market puking.

On to the vivisection; let’s start with the ISO’s hourly  markets:

Ooops, SP rallied more than NP, what gives? NP didn’t even move, week on week, on an event that saw WECC loads rally 5000 MW:

Not fair, right? Loads up, prices flat, and why did SP rally more than NP? The HDDs were up north, not down south. Vivisection – cut into the beast and see which entrails fall out, let’s start with actual loads:

All hubs up, except for Palo (down 500 MW), but really the only hub that is materially different is the Mid-C. That is the cow that needs to be gutted, dissected, vivisected, for therein, within that hub’s healthy organs, lies the reason why NP didn’t budge.

First, let’s examine how cold it actually got:

Wow, 15 in Billings, they were probably golfing. I recall the sub-zero’s from my college days in Bozeman, 15 is a joke. Portland recorded a low of 30 while Seattle shivered through that fleeting hour where its mercury touched 32 ….. YAWWWNNNNNNNNNNN.

Still, it was cold enough to jack loads 3000 MW, that should have done something to prices, right? Yeah, if supply held constant then net demand goes up 3000 MW and the hub has to dip deep into the stack:

Oh so close, at least that is where the market is putting the hub’s bom. So close to a major bullish inflection point, but the forecast is well behind, lags the market by about 2000 MW. If the market is right the hub is poised to explode, or it should have exploded yesterday, it didn’t, because the hub is where the forecast crosses the stack, not where the market crossed the stack. The market was bullish because it was long, the forecast is neutral because it is right.

Still, this doesn’t complete our autopsy, we need to examine each organ (fundamental) to see which one malfunctioned yesterday (actually, which one didn’t malfunction). Let’s start with hydro, always a good place to begin when there is 30,000 MWs of the stuff, and Coulee, the mother of all plants, is where we shall begin:

Note the flat discharge across all on peak hours yesterday; earlier BPA needle peaked hours 17-19, but not yesterday, they ran the 128kcfs through the plant on every on peak hour. But the glass half-fullers would counter that they just liquidated bullets by BPA being so short-sighted as to generate into a cold event. Not really, storage (reservoir elevation) barely dropped. In fact, BPA built a little cushion for this event by drafting Arrow, like around two feet of cushion and they didn’t use it, they barely drafted the reservoir. That extra two feet is now hungrily staring at those BOM $30s, so are we.

Arrow isn’t done drafting, either:

Which means GCL will either continue to push 128kcfs through the penstocks or the reservoir will further rise; either way doesn’t bode well for BOM.

Thanks to the EIA (best federal agency ever created, btw, and it is too bad we can’t vote how our tax dollars are spent, I’d give them most of mine), we can look at each of the utes and see how they behaved yesterday:

This table suggests that new generation (compare current to week one) really didn’t change much, the hub was up but 500 aMW (mostly explained by Puget). So how did Mid_C serve that 3000 MW of new load? Gencos helped out, quite a bit:

The hub pulled almost double versus a week ago, Avista even fired up their peaker, but it probably cost them to do so. We still don’t think we’ve found all the reasons why yesterday was such a flop, it must be those tranny flows:

Yup, the AC and DC exported about 1k less each while BCH just sold the same – probably didn’t like the price that much. While on the tranny bandwagon, let’s look at how each of the utes played their transmission cards:

Pac had the biggest delta in the off-peak, swinging about 500 aMW versus last week. The rest of the utes pretty much ran their lines unchanged.

The hub, in the on peak, exported 1200 aMW less. Most utes either imported more energy or exported less.

Post-op has been completed and our conclusions are simple – it just wasn’t that cold. The northwest has ample resources to meet those levels of loads and all that is left to do is chase the bom down, because the weather outlook is turning bearish:

Mid-C Temperature (Composite)

Three circles, three observations.

1. There is confirmed evidence of more cold next week, perhaps not as cold as this week, but below normal
2. Beyond next week things get warm, at least how the outlook sits today.
3. Very dry pattern sets in next week …Q1-3, anyone?

Speaking of dry, let’s look at snow levels:

Most basins are slipping from earlier this week; with that dry next week the negative anomalies will only grow.

Other Stations

Anything north of red is bearish, all three cities are bearish, need we say more? On the generation side of things there isn’t a lot to report. All the nukes are running and there is a smattering of new outages

offset by a smattering of returned units.

Gas demand (core) is up, it should be it was cold, but not that much:

All hubs are up year on year, except for PV and SP, they are down, and will stay down given the bearish temperature outlooks, all of which suggests that the west gas basis outlook will weaken.

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Conclusions

• BOM
  • Mid-C
    • 
    • Short, we don’t like the fundamentals, headfake cold next week aside, and love the high prices……………SHORT
    • On that light load we carried into the “event”, we still don’t think it is a bad position given the market’s indifference and will keep it on, but we are net short mwh for the period
    • 
  • Other Hubs – short
• Jan
  • SP
    •  
    • The market has jacked the roll, we think length just rolling away from the Dec trainwreck, and its probably overdone, though for the trend is your friend fellows it might look like a nice play, we hate it ……………short the Jan
• Q1 & 2
  • Mid-C
    • We’ve been long this and will stay long off of the dry weather and some hints of more cold in bom, and we are short bom so like the hedge
  • SP