Mixed Cocktail

Good morning,

It’s a devil’s brew of various concoctions which neither tastes good nor bad; kind of like a Bloody Mary – for some its delightful, others find it repulsive; today’s fundies are not much different.

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Demand

Let’s start with the good; recent Northwest loads have been unyielding:

The rest of the WECC more or less tastes like Bud Lite, but MidC smacks of a fine German lager. Let’s dive deeper into the good brew:

Week on week, the hub’s morning peak (Sunday) was up 2300 MW; nothing to sneer at. Taste good, right? Let’s look at the BAs:

Every BA is well over 2016 actuals and the twist in this recent cold spell is the Portland load center is quite strong – note Portland General and BPAT.

The forward outlook is somewhat tasty, as well:

The interior WECC (Trump Red) is below normal through the end of the month and even spills into Feb.

While California will be wet (more on that in hydro) and warm, kind of like drinking a warm and flat beer that someone spits into.

And then there is the mighty Northwest, land of the abysmal SickHawks. Hey, at least its cold here and loads are not going to crater, and much of that low-level snow is going to stay low-level snow into the coming month. The region is mired in cold weather; there shan’t be any major tanking, single digits are the stuff of wet dreams, not reality.

Look at Portland sporting the twelve degrees, atta City of Roses; no wonder loads were robust. But look at the contrast between Portland and Seattle, a sixteen degree spread yesterday. Explains the weak ISO prices:

These aren’t in the toilet low, but given record cold up north one would expect a more volatile (upwards) market, but the system just collapsed into itself and kept the energy in the northwest which explains much:

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TransGen

On Saturday the northwest backed off exports to California by nearly 4000 MWs, plus Powerex was a big seller, 1000 MW more than last weekend; together that accounts for approximately 5000 MW of retained energy inside the hub. Also note how ZP reacts, exports to NP are cut which doesn’t make a lot of sense, except perhaps from the perspective that SP was cut by the DC so pulled out of Path 26, but that doesn’t explain how NP made up its shortfall.

The plot thickens when we realize the Mid-C had zero wind energy; just when the hub could actually use it, that energy source takes the ball and goes home.  CGS is back to 100%, so are all the nukes. California gas outages are stronger in SP than NP:

Both ZP and NP are off from 30 days ago while SP is up. Gas Noms are off everywhere from last year:

These hub total plots reflect a full year of noms; the redline represents today’s totals. All of which just says that the WECC could have served a lot more load than it has and not seen any problems. Given a general weakening in expected loads over the next few weeks, we struggle to see how things are going to get materially more bullish unless we see the big ISO outages. That, for the time being, remains the silver lining, the straw that the longs inanely grasp – we’re grasping it too, we still like SP length.

No compelling reason why I included this plot, aside from just pointing out that we are tracking ex-WECC flows, and those have materially changed over the last couple of days.

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Hydro

We think there are several key developments taking place in the WECC hydro outlook that will have a significant impact on the balance of Q1 and Q2, perhaps Q3. It’s a mixed cocktail of good and bad, but more good than bad, starting with the reservoirs:

BC and Mid-C evacuated over an MAF in the last week; some of this is the Oct-Nov precip overhang, but now we are getting into BC’s flood control drafts; that is bullish Feb-March. And, with more cold anomalies on the horizon, there is little chance of seeing natural river flows recharge those reservoirs. That is good and bad. Good for the near-term but not so much for the period past 21 days; there is still a lot of low-level snow on the ground, call it fifty days of cumulative precip, that is waiting patiently to fill a river upstream of Coulee. If the weather turns quickly warm there will be some significant flows and great pain.

Our side flow indexes tell it all:

Every index is now in uncharted waters; these are so low the bottom of HMS MidC is grinding on rocks;  they may even be setting ten-year lows. But bear in mind that all of these index basins have a lot of snow on top of frozen ground. A string of fifty degree days will kick off a big surge, the first freshet of the season – we fear that – but don’t see it happening over the next twenty days.

The Northwest is poised to get one more dump, and it’s a big one, then it goes dry for the balance of the forecast period.  Net it’s slightly below normal over the ten days, but it’s those dry 11-20 that has our attention.

California gets wet, again, too:

Like the state needs more water/snow; regardless of its needs, it will get more rain/snow, but then, like its northern cousins, the state goes dry.

This table reflects the snow anomalies for all the non-MidC basins; everywhere is above normal except the Missouri, which is actually a Mid-C basin. With more wet on the way, these anomalies will grow.

The Mid-C tells a different tale, one of below normal where it counts – in the upper Columbia. Given that we are now beyond the half-way mark in the water year, and it is below normal as of today, and the outlook is slightly below normal, these numbers only grow more bullish. Perhaps even upbeat enough for the Bureau to punt on drum gate?

Can’t talk about the Mid-C on Monday without posting the 10 Day Outlook:

The forecast is slightly over last week’s STP but look at the big rallies five days out, up 1600 MW. Also, note the massive haircuts towards the end of the month versus their forecast from earlier last week. Lots of volatility in the land of water.

We doubt there is a significant change in the 120 days (to be posted later this afternoon) but every time we say that there is a massive swing. If anything, we think the swing will be towards a tightening given the reservoir drafts and the dryish outlook.

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Conclusions

• Jan
  • 
    • We see no reason to be short; the market already pounded BOM down and given a cooler outlook and some dry weather we’d be long any of it, but we’ll be long just Mid-C
• Feb
  • 
    • Without an early Freshet, we doubt the Mid-C tanks too hard, and these charts scream buy, pretty much everywhere. We like the expected outages across the South (ISO, PV, GB) and think length is not a bad thing, but let’s look at the spreads first:
• Spreads – Months
  • 
    • The market killed SP; we already know that, but did it kill it too much relative to the rest of the WECC? We think …yes.
      • We’ll put on the following long spreads:
        • Feb SPMC
        • Mar SPMC
        • Mar SPPV
        • Apr SPPV