Good Morning,
Before diving into the WECC’s outlook, let’s get the holiday schedule out of the way:
Dec 22-23 – Holiday
The rest of the days we will be working and posting.
Markets
ISO SP DA vs HA
A relatively non-eventful week at SP; the deltas between DA and HA have tightened while the overall peak prices have dropped. A similar story at Pac West:
The panic of a week ago is no more, stable prices reflecting a system flush with capacity to serve loads, though this weekend will be a test as several BAs serve into Design Day demand.
Loads
NP and Mid-C both realized major drops, week on week, in loads, though they both will reverse that trend over the weekend.
Mid-C
Mid-C Composite Temperatures & Precip
Looks scary this weekend, but it’s not that scary, the Westside is not that cold:
Seattle, WA
Maybe drops below 30 on Sat-Sun, but look what happens on Mon, and most of next week …major warm anomalies. Assuming BPA has to draft over the weekend to serve its loads, then all of that weekend water will flow through Mon-Friday turbines … ouch especially coupled with loads falling off a cliff.
And BOM looks vulnerable, even though it has sold hard from its highs, there may be more pain in store:
Given that the weekend prices are excluded from BOM, and that BOM looks fundamentally weak, we’d have no choice but to sell those $35s, especially when we take into account all of that hydro energy that needs to find a home next week.
RFC 10 Day
The feds don’t like BOM, either, they just jacked next week by 800 aMW, a week that doesn’t need jacking, it needs pumping, but there is nothing to base a pumping upon, except maybe transmission flows, they have been weak of late meaning incrementally there is more demand potential via exports.
Both the AC and DC are exporting less than their weekly average, and we doubt that changes that over the weekend. Next week, however, we expect to see an additional 2000 aMW flowing south, that will help support Mid-C prices.
The northern intertie has room to export more into the Mid-C, and given the warming here and there, we wouldn’t be surprised to see BCH be more aggressive sellers next week, not because they like the price, but because they will be longer off of warming.
Gas Noms at the hub have gone nuts for the weekend:
Every turbine but Mint Farm nominated, and we are confident they’ll just pull inadvertently and run. This weekend maybe just a yawner with all those turbines generating.
Speaking of generating, check out next week’s wind forecast:
Warmer weather means low pressure means more precip and windy days, we are seeing another 1000-2000 MW of wind generation next week …ugly, huh?
NP15
Sacramento, CA
Unlike the Mid-C, the cold falls on business days next week, and for Sacto it is cold, and it stays cold for the rest of the month. Offsetting that exuberance are those 1000-2000 incremental MWs coming down the AC next week. Also offsetting these HDD loads is all the water in the state, at the moment:
Wow, look at the Yuba, flowing nearly 12kcfs right now; contrast that with last year’s paltry 164 CFS. Or take the Tuolumne at 4600 versus last week’s 93 CFS. It rained hard in the Golden State, and now its rivers are flush, and energy output is up. But the state is going dry, again, and it only takes a couple of days for the water to make it to the bay, so we aren’t too concerned for BOM.
Prices, like Mid-C, were beaten down, but we think it’s trading close to value and are entertaining going long the spread.
SP15
Burrrrbank, CA
Slightly over normal next week but hints of very cold beyond that. Probably too far out to bank on but we’ll be watching. A few more HDDs and some precip and LA could have a white Christmas …hah …won’t happen.
The hub appears fairly priced (BOM) but we’re long the NP, so we’ll pass at an SP position, especially since the holiday is approaching and the illiquid WECC will have even less liquidity. Whatever you put on and leave on you better plan on just taking the index.
That cooling weather will force bigger storage draws, but Socal has plenty of bullets:
They have 40 bcf to play with, assuming the ute would pull down to 2014 levels. We can’t see them doing that, not given the state of their state’s politics. Until the Aliso injection drama is over, we expect Socal Gas to husband that storage, but point being if there is an emergency, they have the bullets.
Not much news in the outage arena:
SP picked up a net 300 MW of capacity, while NP did about the same.
Desert Star is a new outage, 500 MW of cheap capacity.
But is partially offset by the return of Etiwanda 3.
Palo
Phoenix, AZ
Not much to say, the desert goes from above normal to normal; loads will pop a bit, but nothing like last year.
3000 MWs higher they were last year on the same day, but it will need to get a lot colder than what the current forecast delivers to reach those levels.
It looks like Mesquite is back from its maintenance outage, back with a vengeance by nominating a robust 222,000 mcf for tomorrow. That might help firm things up at Socal Border.
The hub’s head-fake rally has petered out; now it’s trading at value with nowhere to go. We’ll pass on doing anything there.
Conclusions
- BOM
- Mid-C – short off the cold falling over the weekend (and thereby excluded from the BOM price) and the wall of water facing next week’s weak outlook.
- NP – long off of cold weather and the short MidC position
- SP and PV – flat, why clutter our minds over the holiday?
- Jan
- Mid-C
- We think it is trading at value but if we hate the BOM we can’t really like the Prompt, and since we were short the Q and bought back the Jan we’ll resell it to make it a short Q
- Mid-C
- Q1
- SP
- We’re converting the short Q1 Mid-C to a long SP-MC spread. We think the Q is fairly priced but like being hedged over the long holiday, plus we believe now is a great time to go long both the one and two. We are seeing normal precip coupled with cool weather for the rest of Dec in the Mid-C ….that means above normal snow. With the first Flood Control coming in just a few weeks, and a growing water supply outlook, the Q1 Mid-C could come under attack. So we are LONG the spread
- SP