First Freshet?

Posted on by William Griswold

Good Morning,

Strong signals, at least on the Snake, that the season’s first MidC freshet is underway; we’d caution on betting it will be a big one as weather reverts to a colder pattern and shall put a brake on the melt.

California is dam-bursting off the charts rendering WY17 one for the record books, and more rain on the way. That isn’t news, it’s even on FOX every night, but doubt the flows on the Snake at Weiser get a Trump Tweet, though we’ll tweet about it. Those flows gapped 30kcfs and are now putting pressure on the Lower Columbia projects, though those projects rallied, they rallied a lot less because they spilled a significant body of water:

When you see spilling in February you know there is a lot of water; BON and IHR puked water, even PRD did a bit, but we get ahead of ourselves, let’s check out demand before we draw our hydro conclusions.

Demand

Loads are weak, especially in the northwest, where temperatures have warmed up but not yet warm.

Warm and getting warmer for the next couple of days, but then sliding below normal through BOM expiry and into March. The question is how warm does it need to get to melt low-level snow. Spokane reaches a lovely high of 45, but its lows fail to breach the 40 handle; Boise isn’t much warmer. These temperatures affect loads more than melt, but it’s the reversion to cold which we think is the most relevant factor in this forecast. Natural river flows will pick up over the next couple of days, then they will fall back, so if this is the season’s first freshet, it shall be a short-lived one.

California temperatures are cool and must be considered bullish for this time of the year; heating loads will pick up some.

Interesting forecast, Palo posts a few 80 handles while Denver drops into the teens; but the heating load rallies in the interior are more relevant, and we’d call this a bullish forecast.

Hydro

More precip heading towards both the Mid-C and California, but then everywhere goes dry.  This additional precip, without a major warming trend, won’t rally natural river flows much, and the dry and cold behind days 1-5 will cut those flows. That is our “glass is half-full” scenario; the “glass has a hole in it” scenario is best said by the NWRFC:

This is remarkable, one to copy and paste into your energy trading scrap board. On the 17th the RFC has added 5000 MWs of energy versus last Monday’s STP. That is a change you won’t see every day, but we don’t believe it. There isn’t enough new rain, nor is it warm enough, to increase flows that much. Plus, we already know BPA is ready to spill whatever is needed to keep gas on the margin. That said, the RFC does receive forward looking regulation data from BPA, so maybe something is afoot? We know it’s not a Coulee draft, or a draft anywhere but in Canada, so we just don’t know how they get that much water. Let’s go back to the Corps flows:

The Lower Columbia, as measured at BON, realized discharge through the turbines of over 200kcfs yesterday, would have been much worse if they hadn’t sent 40kcsf over the spill gates:

We drove to Spokane over the weekend and were amazed to see how much snow has cumulated on the ground across the state. Even in the central part of the state, near places like Ellensburg, Moses Lake, Ritzville, there is six inches to a foot of snow on the ground; I’ve never seen that this late in the year. When all of that melts there will be a cataclysmic “meltdown” at the Mid-C, but we just don’t think that happens in Feb and don’t see it going on in the first week of March, either.

TransGen

That looks bullish, the 12k MW of ISO outages, right? Not so fast, let’s look at what recently tripped:

Oh, mostly hydro; probably taken offline because there is so much flotsam in the rivers they are protecting their turbines. There are some new gas units, however, and probably more to come as the pre-Summer outage season commences.

Gas noms remain at season lows, though we saw a spike at the Mid-C (hey, don’t they look at the RFC 10 day?)

Three plants increased their noms over weekend levels, and the hub is up from Friday.

Flows out of the northwest and into California fell to very low levels yesterday, and it wasn’t because of TTC derates; our only explanation was weak CA prices and a dearth of wind at the MidC. Meanwhile, Powerex was a big seller over the weekend reversing a trend of buying.

On top of the 1500 MW derate already in place, another 1k was scheduled over the next couple of days, coinciding with those massive 10-day flows. This week’s cash market shall be a good litmus test for the rest of the BOM; if it doesn’t trade into low teens than the bom 20s look safe.

Conclusions

  • Feb
      • Market continues to sell off and if you believe the ten day you’d sell more Feb MidC; we don’t, we just think its not warm enough to kick off the first real freshet, and with cold weather coming we are staying long at
        • Mid-C – LONG
        • SP – there is nothing, load-wise, to save the BOM but outages might help; the hub won’t see more water than it has today the rest of the year, so this may also mark the low-“water” mark for SP heat rates
          • SHORT
  • Mar
      • Huge selloff continues in the March, and that might look smart for the next couple of days, but afterwards we expect a cash rally off of cold interior and cold northwest
        • MIdC – The RFC 10 day worries us, and we don’t want to give up our length there but need some protection (we were and are short April), so we’ll short the March to protect the Feb
          • Short
        • Palo
          • Dirt cheap, not much downside and the on/off is cheap, and the next bout of the 80s will add to load, plus there is a nuke coming offline
            • HL – Long
            • LL – short
  • Apr
      • Same chart, different month.
        • SP|MidC – we’ll go long that, as much off of cheap April SP than anything else, but we know that when the Freshet at MidC begins it will be violent and won’t want to own anything that begins with “M.”
          • MidC – Short
          • SP – Long