Good Morning,
We thought about Volte Facing on you again, but decided it might make us dizzy, though the cooling weather outlook makes it tempting, and so does the recent selloff in BOMs, though some of that was gas-driven, not all.
Wow, that is some volatility, but note the tiny deltas between the forecast and the market …tempting to jump back in, but let’s first digest the fundies before we make hasty decisions, then we’ll make hasty decisions.
Gas took a tumble, spot gas:
Two comments:
- Socal traded over PG&E? strange
- Stanfield got smoked, we’d expect that relative reversal to reverse relatively soon
On the subject of gas, recall our hyping the blow-out in the Feb-Mar PG&E Socal spread a few months back? We do:
When we hyped it the spread was $0.34; it settled yesterday at $0.17 … ka-ching. For the record, we’ll buy it back today.
The ISO HA / DA markets belie the relative mildness of the last couple of days:
The Mid-C virtual hub we created (avg of BPAT, PACW, & PSEI) has flamed out over the last couple of days, at least compared to last week, but we suspect there are still embers and more fireworks are in store of this coming weekend, more on that when we get to Demand.
The HA markets have lagged the DA most of the last three days; the trend which was so friendly (HA over) has now turned into a frenemy and is biting the virtual traders in their arses.
Looks even uglier for PSEI, and we think those HA < DA marks just speak to a healthy Northwest system, it just isn’t that cold right now in the west-side load centers.
Demand
Let’s get the loads out of the way.
Yawn. One item of note, check out the deltas at PV between this year and last year; gives a decent representation of what will happen if the Southwest gets cold. Does it? Read on ….
Mid-C Composite Temperatures & Precip Outlook
The cold stays even extend another day, and the rest of the BOM is either at normal or slightly below. Call it bullish, but bear in mind we live in a relative industry, so call it what you like, but call it relative to the market price. How is the west side looking?
Oooh lala … 22 for a low in PDX, that’s great, but note which day it falls upon … Sunday, dang. With the B Team at the helm, however, it may make for an interesting weekend voyage, which is why we think those HAs might get spikey while sparky is calling the shots.
This station warrants a large rectangular box, almost looks like an inverted refrigerator, which is about how it will feel in the state capital for the rest of the month if you believe our free forecasts. Call it bullish, we are, we haven’t seen the rest of the WECC (RM excluded) chilled while the Mid-C is cold. Just like summer heat, prices blowout when all hubs get tight, they weren’t all tight last week, the SW had warm anomalies. What about LA and PHX?
More refrigerators. Both cities are going to experience some chilly weather for the remainder of the month, per our weather. Now go back to those PV loads and note the 2000 MW rallies last year realized over this year…this forecast suggests something similar could be in store.
How cold has it been?
Nippy in the hinterlands, Kalispell is basking in minus eight, Spokavegas loves its sixes, and further east, Billings couldn’t break into single digits, and that is strange to see Kalispell colder than Billings. But move west, and you see Seattle at thirty and Portland at thirty-two, just not that cold.
Hydro
We have a few comments, a few reports, to discuss on this subject. For starters, let’s examine the ten-day outlook for precip:
Mid-C and NP are both above normal, though the former is barely while the latter is nearly double. The rest of the hubs are below, but they don’t really count for much in the land of hydro.
None are dry, there are no zero’s, but most of the Mid-C precip is westside. This forecast, coupled with the temps, is setting up for some dream ski conditions…if you care. The fact there is any precip, given the very cold, will render some amazing snow.
The NWRFC is upping the energy for this weekend:
But is sticking to its guns for next week. The million dollar question is how high will prices get over the weekend, for that will most likely be the coldest days of WY17. Loads will rally, but so shall generation, case in point is Coulee:
That big plant is running around 120 kcfs through the turbines, but look at the reservoir, it spiked up. Inflows are strong, but the more salient fact in the above plot is how much additional, unused, capacity is at the project. BPA can push nearly 200kcfs through the turbines; it is running, on average, just above half of that. They have the reservoir to run it full-gate, they are not. Just this plant alone could put another 2000 MW of energy into the hub, and if it did generate at max capacity, there would be a wall of water heading at the 14,000 MWs of downstream capacity. All of which makes us just a little bit squeamish about getting too giddy over BOM Mid-C.
BPA isn’t too worried, they have cut the draft at Lake Pend Oreille – Box Canyon only passed 10kcfs yesterday, last week they were pushing 20k through and a month ago nearly 35kcfs. BPA has bullets that aren’t in the chamber; they aren’t even in the magazine. Also, note the flows coming in from Canada (which is net of the Pend Oreille cuts) … up 12kcfs. One final comment, the cold weather of late has dramatically cut natural river flows, the Mid-Columbia side flow index is at a five-year low.
BC Hydro Rivers
Arrow is up 400% from a month ago which is pushing an additional 30kcfs towards Coulee. Some of this might be BPA drafting, but we think more of it is BCH serving loads.
California Rivers
The recent rains are filling the California rivers; the Yuba is up 300%, so is Cherry Creek and the Consumnes. The region is poised to get another two inches over the next ten days so don’t expect these to abate too fast.
All of which brings us to another important question, one that should be on everyone’s mind if you hold any Mid-C exposure in 2017. What is the water supply situation and what will happen this winter and spring? In a word, it is now normal.
We’ve been avoiding talking about water supply much because 1) RFC’s numbers have been all over the map; 2) was too early to be relevant. But now we are entering the witching hour where anomalies in Dec matter for the final anomaly in Apr. And the anomaly today is just normal, at least that is what the Ansergy anomaly suggests; the RFC is higher at Coulee (102% vs. 98%) and lower at TDA (98% vs. 101%) – RFC, Ansergy – respectively. Both forecasts are consistent; it’s normal. Though we expect the snow to build over the next ten days and we possibly could be looking at slightly above normal going into the new year, which tees up the initial flood control drafts, and also suggests that GCL may see more drum gate maintenance this spring. Given the above, we are less enamored of the Q1 and Q2, though we are short as of Monday, see no reason to buy it back today, even though reservoirs are getting drafted:
Generation
Not a lot to say here, and most of that is just bearish. Outages in the ISO have pulled back from last week:
And those reductions are shared equally across both NP and SP.
Nothing earth-shattering in the returned units, aside from the contrast to the new outages:
And note the new is mostly irrelevant … hydro! The nukes are all running, and renewables are too.
Avista is running its peaker, most of the plants are online, we suspect every plant will be running on Sunday. And, while on the subject of gas noms, let’s look at our Nat Gas Demand Indexes
SP lags 2015 by about 0.6bcf/day, but we think that will change with the cooler outlook.
NP didn’t come close to reaching last year’s levels, but, like SP, they should test those levels sometime in Dec.
The Mid-C breached the highs of last year and may/should set higher highs over the next week. For the record, our Demand indexes are made up of multiple LDC points that have very high correlations to EIA actual demand. Each point was tested and only the ones with R values > 0.80 were used in the index. In other words, our index is an excellent indicator of actual gas demand.
Transmission
Flows out of ZP continue northbound and yesterday’s were almost identical to the weekly average, all of which just speaks to the above normal weather CA has realized.
The DC saw some action yesterday, as in inaction, cutting 750 aMW of exports to SP (versus the period average). Not sure what is driving that, it wasn’t TTC, that is unchanged. I guess no one liked the price and everyone told the Californias to hug a tree.
Same story on the AC, together with this 1500 aMW less energy that made it into CA yesterday; loads don’t indicate the northwest needed the energy, and the ISO prices weren’t that bad. Really don’t have an answer, maybe one of you do and will share?
BC must be seeing their loads slacken, their exports to Mid-C jumped 250 aMW over the weekly average. Be interesting to see what they do over the weekend.
Conclusions
- BOM
- Mid-C – we were short going out Monday, and we were right, but we aren’t pigs, we were bears, and the phat profits from being a prophet need to be taken and banked. Should we go long? We’d be tempted, but the untapped hydro capacity in the northwest causes trepidation and suggests caution, so all we will do is buy back our shorts and be ………..FLAT
- NP, PV, SP – take your pick, we are going long all of the above off of a swing too much colder. If Mid-C does rally hard those virtual transmission lines will rally up the other hubs; we already saw that. I think you can be long either HL or LL, we’ll stick with the liquid HL and be long SP and PV.
- Q1 & Out
- We were short the Mid-C one and two on Monday, we will stay short in the two, buy back our Jan short but leave the Feb-June short.