Good Morning,

Monday brings pretty much the same as Friday; the northwest remains chilly, California is mired in normal, and the desert is warm. The Palo nuke is down for its refuel, as expected.  Northwest hydro remains strong but buried in all of the bearish charts are hints of near-term bullishness, mainly from the rapid draft of Coulee. Long is right and short is wrong, at least it was Friday as the market rallied across all hubs. The 2017 Bear Mantra, call it the “Trump Trade” – short everything – has fallen to the wayside, now it seems long ain’t wrong, but we’d advocate caution on becoming too enamored of length.

For a few hours this weekend SP traded over NP which is probably driven by the abundance of hydro but is also reflective of the abysmally low clears in the ISO. The term market, it seems, is separating from a weak cash market and possibly is due for a correction:

The Palo BOM is especially bullish of late; it’s like everyone was caught by surprise that the nuke was going down, or maybe they saw the 90s in Phoenix. We’d suggest that this might be a bit over-done and should, probably will, give some back this week.

WNP2, CGS for your newbies, is optionally derated to 65% because BPA finds itself longer than it would like, but that plant needs to get refueled sometime this spring; why not take it down while their drafting Roosevelt? Take it down in May, when they switch to refill, and it remains cold, may make may a play.

Demand

The desert is above normal almost every day of its 21-day forecast which is a contrast to the California and Northwest forecasts:

We circled Sacramento because if will realize 5 degrees below normal this week and may see morning spikes in demand off of heating load. Burbank won’t see any jumps in anything, in price or load, as it is just normal, which is an adjective not often used to describe anything in California.

Lots of blue lines below normal because the Northwest is projected below normal for the balance of this forecast, which is nearly the balance of Balance. Upper-level snow will barely trickle off the hills and with above normal precip heading towards those mountains the total snow pack will continue to build for the next week or so. Strong April loads and weak natural river flows are a recipe for continued length at the hub we’ve loved to hate, now love to love and loath to hate.

Loads are remarkably sideways, not up, nor down, Mid-C and Palo are the only hubs above last year.

Three blue circles in April bodes poorly for the ISO. Lake Tahoe is downright frigid as skiing at Heavenly is, well heavenly. The lows in the northwest dropped below freezing which will lay the brakes on the melt which only defers the inevitable runoff pain til May or June; May or June, which is it? Always the question in April, we’d be leaning more towards June this year as weather trend is cold and snowpack continues to build. Think 2008; cash was incredibly strong in early May, then out of nowhere the Kalispell, MT forecast posted 85 degrees and ten days later cash was negative. Length in May was the play and so was timing the June short. Given our bias towards tightening today, we’d be reluctant to short much at Mid-C for this week, at least.

Hydro

The most salient Monday Morning number is 1239′; as in Lake Roosevelt is now sporting a thirty handle and it is but April 10. Today the Corps should release its final flood control target and no doubt it will be 1225′, or thereabouts.  Fourteen feet in 20 days and they just completed 13′ in 14 days. Do the math, and these next 15′ are easier than the last. We doubt BPA will need to draft in May; they should be done by month’s end, leaving a nice long call option on Roosevelt storage for May. Of course, they can’t fill about 1255′ before completing drum gate work, but that won’t even come into play. It just means that the 180kcfs flowing through Coulee’s turbines won’t be flowing through Coulee’s turbines that first couple of weeks of May rendering May a possible exciting play.

How about long May MidC LL at $4.00? LL today is a dog, mostly because BPA can’t shape its water, Coulee is run of river while it drafts.

Forget those aberrative drops to 140kcfs; this project is range-bound between 170-180 kcfs regardless of demand, wind, imports/exports, or anything. No shaping, just run the water through the turbines. That shall change once draft ends. We already know how aggressive BPA is when it comes to money (optional spill) and we expect them to start shaping early in May, plus CGS will be swapping rods.

The story can never be that simple. While a scenario emerges from the fog bank of fundies another is also taking form – a snow year that refuses to end. All of the Upper Columbia is projected to receive more precip than normal; coupled with cold, means more build and more water for June and July (maybe May, but we’d be biased towards a later runoff).

California goes modestly dry, dryer than last week at least. Not that it matters, its rivers are robust, and her snow is off the charts.

The cooling has slowed the melting, the drying will further pull these rivers back, but don’t expect hydro energy to fall, too; it won’t, these projects are mostly spilling.

Northwest rivers are a mixed back; the Clark Fork continues to build while the Spokane is now flowing about 40% less than its peak. Low-level snow is gone, all that is left is the upper level, the big snow, the freshet that matters, though this year that first freshet was one for the record books.

Before leaving hydro, let’s check out our favorite measurement of the status of the Runoff – the famous Ansergy Mid-C Sideflow Index:

When this index peaks the water year runoff has peaked, and it currently is barely registering, though it is up 400% from a month ago. WY17 may set a new high for total volume, perhaps for peak, because the Cascades are laden with snow, unlike any recent year. Runoff hasn’t started, but it’s poised to begin if only Mother Nature would warm up. It doesn’t look like that will happen for the next ten days which only pushed the inevitable deeper into June and July

TransGen

A nuke is off in Palo, the Mid-C nuke needs to go off, and ISO outages are also off a touch:

IPP is off, spring maintenance most likely, and just one gas plant came down over the weekend. Just a few returned, too:

Gas noms remain weak:

How could they be anything else given where things stand, though we suspect some gas will need to be returned to service in Palo.

Massive flows on Path 26, which helps explain SP trading premium to NP for a few hours over the weekend. The AC saw a big cut in southbound flows, though for just a few hours, and we see more southbound energy out of Canada. We expect the latter to increase exports into Mid-C as the market tightens, but not reckless selling, sell just enough to support prices and maximize the dollars flowing north.

BPA updated its term TTC on Friday:

Nothing major, but the AC continues to be tweaked.

Conclusions

• April
  • 
    • Palo – Trend’s your friend til it’s not
      • HL – Short
      • LL – Long
    • SP15
      • Prices are so low it feels criminal to short it, but then we’ve been told laws are made to be broken
      • HL – Short
      • LL – Long
    • MidC – as long as it stays cold we like owning this, at least from the on perspective; until BPA is given back its shaping tools we’ll stay away from the off:
      • HL – long
      • LL – flat
• May
  • 
  • Palo
    • HL – Short
    • LL Long
  • SP
    • Simpl selling the on|off
      • HL – Short
      • LL – Long
  • Mid-C
    • HL – market never really sold down enough to make this a buy: FLAT
      • LL – long for size; if BPA can meet its draft targets by the end of month the shaping should resume the next day and LL will see less hydro energy; of course, this is a continued cold weather play; if it warms up all bets are off, but we’ll have plenty of time to reverse that
      • LONG FOR SIZE

If you see a trend here, you’re right. One of the greatest trades of the year was buying the on/off a few weeks ago; the herd has jumped aboard that train, though it left the station weeks ago and is now heading for a cliff. We’re shorting the on/off now:

• June
  • 
    • Palo – the on/off hysteria has had its hysterectomy in June, no trade there
    • SP – we have plenty on in April and May, but will add some June length to hedge our Mid-C short
      • HL – long
    • MC – need some protection from front length
      • HL – short
      • LL – flat