Speechless

Good Morning,

Not a lot to say, today, hence we’re “speechless”. Weather is warming, there are hints of drying, gas is stabilizing and maybe rallying, the ISO has more outages than normal, and it is Friday. That pretty much summarizes our outlook as we depart the first full week of 2017, but don’t take our word on it, read on …

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Demand

One blue circle, three red – says it all. Loads are weak, blasé, except for the northwest which staged a mini-rally of sorts, though you couldn’t tell that from the ISO prices:

Remarkable that nearly every hour across those six points the DA traded over the HA. More so at Puget, which realized strong loads yesterday, though its EIM prices look more like a late May day:

Puget had a big day yesterday, only off 116 MW from the highest loads from last week. The BA did clear $84 for 15 minutes during that hour, but then slipped back into the high 20s to low 30s for the rest of the day. This is a healthy system, one that will be long until the first PDX 100+ summer day.

The Interior load centers remain bullish, demand-wise, for most of BOM; three of the four will participate in below normal temperatures; PHX will not, that fair city will be above normal most of Jan.

Same with CA – mostly warmer than normal with a one-day head fake cold event randomly tossed in around day twelve.

And then there is the Mid-C, just won’t warm up, won’t melt that 3 MAF of snow lying atop those low-level grounds; might try over the weekend but its too short-lived and not warm enough. We need one of those Pineapple Expresses to blow in from Hawaii to melt that new SIberia, then the fireworks should start, but there is nothing coming from Hawaii, it’s just back to colder than normal.

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Hydro

Check out the first table – hub level water supply summaries; every hub is above normal. The Mid-C rallied 5% but that was dwarfed by SP15’s 18% surge in snow. All is wet, right? Yes, kind of, until you peel a few layers of the onion back and you realize all is not how it appears:

In this table we are looking at snow anomalies by Ansergy Hydro Basins (our grouping of the northwest’s production). This table is sorted descending off of downstream capacity which places the most important basins at the top. A couple of observations:

• Below normal where it counts
• Freakshow anomalies in western Oregon – 1000%?; we’ll need to check that one out, but I guess if PDX can bag a foot, Mount Hood probably got twenty.
• Those west-side anomalies are overly skewing Ansergy’s water supply, we will need to adjust our weightings;
• Given the below normal production basin anomalies; and a not super-wet eastside preicip out look, we think the mid-Jan water supply outlook is more bullish than bearish.

There is another storm heading into the northwest, but before that hits, and after it hits, there is nothing buy dry. These snow anomalies won’t rally much, at least on the east side where it matters.

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TransGen

This set of plots explains much of the NON volatility in real-time prices. The northwest was cold yesterday, loads were strong, and prices didn’t do anything. Note how the system just collapses upon itself, transmission-wise. The northwest cut about 3000 MW of exports to Cal; BC cut to, but that was about 10000, so net a 2000 MW instant supply resource, just enough to snuff out any hint of bullishness. Healthy system.

We noted the ISO has a lot of outages today, more than three of the last five years. But also note how each of those years realizes a Feb surge; California is heading into its Feb-Mar maintenance season which will put upward pressure on prices.

Several new units came off line, let by Palomar Energy Center; more will follow.

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Conclusions

• Jan
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    • The onpeaks have bounced off of the lows and are up a bit; the offpeaks are still in their freefall. Fundamentals are not that weak, our biggest fear is very warm northwest which will melt six weeks of cumulative precip in the hydro production centers, but we don’t see that coming.  Long SP & MidC
• Feb
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    • It’s the same set of plots as Feb, but our thoughts are different. We fear that low level melt and at some point this entrenched cold spell will break and most likely followed by an entrenched warm spell (recall Nov?). When that happens the Mid-C gets whacked with the double issues of declining loads and rallying natural river flows. SP, on the other hand, already has miserable loads and maximum hydro production but more important, it’s heading towards the pre-summer outage season
      • Mid-C – short
      • SP – long
  • Mar
    • 
      • Same graphs, again. We think drum gate work is increasingly likely which will shift draft from April to March (early); we also think there will be a cash melt-down sometime in the next four weeks from low-level melt, all of which means we can’t own March Mid-C
        • Mid-C – short
        • SP15 – long … call the Feb-Mar spreads, if you like, we are long those spreads