Good Morning,
How many names can we come up with for an ugly market? Probably as many as there will be ugly days, today it is sketchy, at best. Let’s lead with the ISO over the weekend:
Not even sure this market reflects anyone’s reality, but there were a lot of very low HA prices over the weekend. Today doesn’t look to be much better:
Gas is opening lower but compare this year’s prices to last year – we’re still twice as high leaving us a long ways to fall – sketchy, huh?
Demand
Let’s look at something that isn’t sketchy, we found it in our Demand group:
Check out the mighty MidC posting the 29k yesterday, up 3k MW from last Sunday. It was chilly out here, but all good things come to an end.
Sorry for the redundant MidC temperature forecasts, but there is a method to this madness. We care about loads, but our bigger worry is melting snow. Freezing temperatures (Mins) will keep that snow on the ground and out of the river but looks like those days are melting away as the Northwest emerges from its ice age.
Burbank posts an 80 handle, that is 25 degrees warmer than today and might even be worth a bit of AC load, all of which will be wiped out by a surge in solar. NP will be just pleasant, low 70s and dry.
The WECC interior is climbing onto the warm bandwagon; Phoenix also flirts with the 80s. Warm in the interior is bearish, expect NV and UT loads to take a dive, so will NM and CO. Sketchy.
Hydro
You know what is really sketchy? The following chart:
4000 MW of NWRFC hydro energy added to an already robust March STP. Now that is Sketchy! We think this is a reflection of BPA scrambling to draft Coulee, something it seems to be struggling with:
They’ve pulled 9 feet in 14 days and have 16′ to go in 17 days. Granted there is less volume in the lower elevations because reservoirs are “V” shaped, not perpendicular, but there isn’t that much difference, and we believe this RFC 10 Day rally is a reflection of BPA drafting Coulee harder than it has of late. Meanwhile, it is warming up, and natural river flows are poised to pick up, perhaps even explode. Before looking at WECC rivers let’s examine all the Corps projects:
The first table is a summary of projects that are spilling; they are not spilling to save the fish or appease the tree huggers, these are spilling to keep gas on the margin at least on the onpeak. If any of you tried to do that you’d be in jail but Trump wants to make America Great Again and keeping gas on the margin is a first step towards achieving that end.
Note the three “RED” circles – these are all storage projects and have all had their spigots turned off. BPA has more water than they can handle without these three adding fuel to the fire. The two blue circles reflect the problem – too much water. Coulee had a strong rally over the weekend despite these storage shenanigans, and BON is off the charts bearish, despite a cooling trend that has backed off natural river flows; flows which are poised to rally with the approaching warmth. Sketchy.
Now for the WECC river summary, a few observations. Flows out of Arrow are down to 8kcfs yet Coulee discharge rallied. To put things in perspective, two years ago flows out of Arrow were 45kcfs, now just 8kcfs. BPA has a problem on its hands and is using every device in its knapsack to fix it. Bear in mind, these deferred flows out of everywhere are merely deferred, these reservoirs will still need to be drafted to meet flood control targets, and those are growing, not shrinking, but before we move to Water Supply let’s finish up with our River Observations.
Flows on the Sacramento are off the charts, but at least the state is going dry for the foreseeable future. Check out the flows on the Spokane, still posting 17kcfs despite freezing temperatures; wait until it warms up, and you’ll see that puny river sport a 40k handle. Contrast the flows on the Spokane with the much bigger Pend Oreille; the latter is lower because ALF is filling the lake and deferring the inevitable draft – sketchy, huh?
Finally, look at the miserly flows coming out of the Mid-Columbia Side Flow Index (Wenatchee, Entiat, Methow, Chelan, and Okanagon) – barely registers. You should expect that index to approach 50kcfs once the melt peaks and this year it will be a very long melt given the sick amount of snow in the Cascades.
The government is recognizing how big this year’s water supply really is – they keep jacking their outlook. Coulee is now 101 for the Apr-Sep and TDA is a jaw-dropping 105; we won’t even mention what IHR is – it’s too sketchy. These are big numbers going into the March Flood Control release, much bigger than where things sat for the Feb release; and all of this is happening with a 1252′ Coulee draft target. In this kind of year, they should be pulling the reservoir down to 1230ish, maybe even a 1220 handle. They still might; drum gate doesn’t impede their ability to draft deeper, they just can’t go higher. We think they will and we think that April will bear the brunt of the revised draft target pain.
The precip outlook for the Northwest rallied over last week, especially at Kalispell, MT where it counts the most. Not sure where that storm comes from because it doesn’t appear to pass over Spokane. This is a bearish outlook; dry would have suited BPA’s purposes better than wet, but wet is what we have.
Not in California, though, it isn’t wet, it is dry. Their prayers were once again answered, no more storms at least in this outlook.
TransGen
A smattering of new outages and an even smaller smattering of returned units.
The Great Basin and MidC saw a mini gas nom rally of late while SP remains mired in season lows.
Flows out of ZP are way off from last week, perhaps reflecting the miserably low ISO HA prices. The Northern Intertie saw some action yesterday with peak sales around 1500 MW, but the AC saw no action and the DC nearly filled the line.
Conclusions
In a word, sketchy.
- Mar
- MidC might be a buy, this week’s cash will probably clear higher than the strip, but we won’t bite, we’ll stay short off of declining loads and rallying supply
- LONG SP-MidC spread
- MidC might be a buy, this week’s cash will probably clear higher than the strip, but we won’t bite, we’ll stay short off of declining loads and rallying supply
- Apr
- Same, long the spread. The market is way below our forecast for SP and Palo, which we think is a mistake. Not so much for the MidC, however, since we expect the RFC to add a lot more water to that month if the flood control numbers go up.
- LONG the spreads
- Same, long the spread. The market is way below our forecast for SP and Palo, which we think is a mistake. Not so much for the MidC, however, since we expect the RFC to add a lot more water to that month if the flood control numbers go up.
- May
- MidC LL has a $4 handle, not sure the entire month will clear that low. Bear in mind, May is a refill month, and if the trend for cold continues into Spring, there may be hope.
- MIDC – short the On: Off
- SP & PV – Long
- MidC LL has a $4 handle, not sure the entire month will clear that low. Bear in mind, May is a refill month, and if the trend for cold continues into Spring, there may be hope.
- Jun
- Short MidC HL
- July
- At some point, the runoff ends, and gas becomes the marginal fuel; when that occurs (at MidC) will depend on how warm the spring is; in this type of water year, the runoff can extend deep into July, even spill into August. Those $12 July MidC LL’s will probably be a decent buy, but the impending doom heading towards MidC will probably drive them lower
- No Position
- At some point, the runoff ends, and gas becomes the marginal fuel; when that occurs (at MidC) will depend on how warm the spring is; in this type of water year, the runoff can extend deep into July, even spill into August. Those $12 July MidC LL’s will probably be a decent buy, but the impending doom heading towards MidC will probably drive them lower