Tightening

Posted on by William Griswold

Good Morning,

Let’s take a 30,000-foot view of the market. That lofty perspective is apropos since I’m flying at that level as I write, en route home from Augusta after a day at the Masters. From this perspective, all I see are clouds over Missouri, but thanks to the $30 internet on the plane I can peer into the wasteland, we call the WECC. That view is cloudy, too, but we see feint signs of bullishness all over, not just in the hot southwest.

For example, nearly every river in the Northwest has tightened up and, if it weren’t for the rapid draft of Coulee, every river would be off. Same is true in California. Let’s get started …

Demand

Loads in the northwest are surprisingly strong; most utes are posting higher order than the same day last year:

Northwest aside, the rest of the hubs are about the same as last year and the same as last week. That looks like it will change in the south, especially in the desert Southwest:

97 degrees in Phoenix is nothing to sneer at, though we won’t realize those lofty heights for ten days, meanwhile, this week, the deserts will approach 90. All things Palo look relatively bullish, coupled with the nuke going down for refueling.

SP15 will see some load rallies off of low 80s, not much, but if you’re long you’ll take anything, right? NP15 can’t align the hot stars and just posts normals which do nothing for length. The hub’s saving grace is the AC derate for most of Spring; without that no doubt Mid-C would be jamming another 1500 MW into the hub.

The Northwest is mostly below normal which is bullish on both demand and hydro production. The melt won’t stop, but it won’t accelerate either, rendering our outlook slightly bullish.

Hydro

Typically supply is half of the fundy equation but not this year; it is like 90% of the Mid-C formula. So much is happening, from reservoirs being drafted, snowpack continuing to build, and low-level snow melting. Most of the latter is gone, that boost to production has crested, and nearly every station in the northwest is posting lower flows. California sees something similar:

We suspect the lower level snow is mostly gone, plus it has been dry and cool. Both of those latter conditions will change as temperatures warm, and a new storm system strikes the state:

2.2″ is almost laughable after the multiple 5″+ storms the state enjoyed this winter, but it will come down as rain and help accelerate the melt. We’d be inclined to think flows will pick up next week and the state will continue at hydraulic capacity for the foreseeable future.

The Northwest is wet, too:

What caught our eye were the projected 1.5″ at Spokane and Kalispell, both double what either station receives on average. Above 5000′ this will arrive as a solid and will add to the build; this last week already received a build:

Not a big build, week on week, but considering this time of year realizes decays, not builds, anything positive is anomalous. Next week will see even bigger builds and the pressure on June and July will increase. The River Forecast finally wiped the sleep from its eyes and jacked July up 1500 aMW; we think there is more of that in store for next Monday’s update. But the rain won’t impact the front, that will be driven by streamflow, and we see that tightening:

Aside from the Kootenay, all of BC’s flows are off. Of course, Arrow is regulated, and the last thing BPA wants is more water as it scrambles to pull the pond down to something with a 1220 handle:

All the reservoirs are being drafted which only makes the drops inflows more compelling; without drafts, one would be inclined to suggest MidC was bullish. But BPA is drafting and will continue to draft most of the month, and it will get warmer, and at some point, upper level snow will come pouring off the hill, just not for a while. Until then, things might get tighter.

Flows out of Coulee are stuck at 180kcfs but note the big drop at BON, down nearly 50kcfs, but the spill isn’t dropping. Instead, the “optional” spill is rallying off the charts.

The non-Corps projects are mostly down, except for the Clark Fork which is still rallying up. Interesting since that basin is fed from higher elevation snowpack, but may simply reflect the fact that there was so much lower level snow that it is still melting.

TransGen

We saw BPA backed ColGen down to 65% and also noted PV2 is at 99% and won’t be surprised to see either or both go down for refueling this weekend.

Nukes aren’t the only bullish Gen item; the ISO also has a host of new gas plants off line:

Lots of units came offline in the last couple of days:

and very few returned:

On the transmission front we see the Mid-C selling to everyone but the Canadians, they are selling to the Americans:

Those sales pretty much turn Powerex into the “marginal unit”  at Mid-C — not sure what price to put there.

Conclusions

  • April

  • Everything is up and we don’t disagree; the fundies are better than they were a few days back. That said, we still hate Mid-C:
    • MidC – short the On:Off

        • PV – Long off of the heat/nuke
        • SP – long off of outages and maybe some AC load
  • May

  • Mid-C – short the Jun-May roll (long May, short June)
  • SP – long the SP-MidC
  • June

  • Mid-C – Short
  • SP – long spread to MidC