Good Morning,

We’re seeing some interesting developments across most WECC hubs; interesting because there are a few reversals from the past eight weeks of bearish signals. For example, look at gas noms:

Both PV and MidC have shown sharp jumps in the past few days; each is worthy of a deeper dive:

Mesquite is running all units and even Apex fired up after its winter slumber. All of which goes to show that Palo is officially into its CY17 cooling season and its first 100-degree day is just around the corner. What makes Palo especially great is it has no hydro to rain on your parade.

Mid-C has lots of hydro, lots of parades rained upon this past winter and early spring, but is that sunlight peeking out from behind those big dark Northwest clouds? If you believe the noms are an indication of expectations than it is the sun, the hub has more noms today than it did on the same day in any of the past three years. This is happening while Coulee is undergoing a rabid draft. Imagine the noms if there was no draft if there was a storage build? We imagine that will happen in May, as the plant is projected to meet its draft targets on April 30:

Just a straight lined extrapolation from today and you won’t’ find that on the website, we made it for this purpose. The point is that it isn’t hard for BPA to reach 1222.7 in the next 18 days, each day is a little easier due to the geometry of the reservoir (“V” shaped). The wild card for everyone is temperature. Warm weather will wreak havoc on cash, but we don’t see warm weather.

Demand

In the northwest we see just normal weather; the composite MidC outlook is slightly above normal off of a warm Seattle anomaly.

Even the fair state of California has some teasers in its 8-14 day outlook; a few days in the mid-80s in the LA Basin and Sacramento (the capital’s first day in the 80s).

The deserts are where the real action lies; Phoenix is projected to hit a high of 97 which is a year to date high. There is a cool streak out beyond ten days but too far out to curb our enthusiasm for all things Palo.

MidC loads are up, year on year, off of chilly weather, but that bullishness is destined to fall to the wayside off of the modest warming. SP loads are miserable, off 2k week on week.

A couple of MidC comments on actual temps:

Both Kalispell and Spokane had higher highs yesterday than earlier this week and will put more pressure on melt
Both cities were below freezing at night putting less pressure on melt

The northwest runoff is in a state of flux; not quite warm enough to trigger the big melts in the upper elevations, and natural river flows will continue to be naturally low.

Hydro

The Northwest will be the beneficiary of more precip than normal, both Kalispell and Spokane are set to receive over an inch during the next ten days. It is remarkable that the Northwest interior will get nearly as much rain as the western cities.

California isn’t dry, but by no means is it wet; NP is expected to receive less than an inch. Recall a few storms this year where the hub stared at 5″, or even 10″, in a ten-day spell. An inch is a joke.

Its rivers are still choked with water; most are above hydraulic capacity and spilling. The state’s warmer weather will accelerate the melt, and these rivers will remain full for the foreseeable future. That’s fine; incrementally there will be no additional Calif. hydro energy. What you see is what you get.

Brilliant discharge is now over 50kcfs while Arrow has backed down to a slight 18kcfs. BPA wishes Brilliant was 18k, but that Federal Monster has little control over how Fortis runs its system.

The big news today, in our eyes, is the huge cuts on Coulee yesterday and this morning. The project has gone from 180 kcfs to 140; all of which shed about 1000 aMW of energy out of the MidC. Interesting that BON increased its production while it cut spill. Halloooo, Optional Spill anyone? We pity the sheep that trust their federal government.

The Clark Fork remains robust, its flowing just under 40kcfs which is close to Avista’s hydraulic capacity at Noxon. That river will soar once it warms up, for now, it is backing off. So are most of the other rivers in the northwest.

This is a new dashboard, for those that care, and is a good index of natural river flows. Each plot is comprised of several mostly unregulated rivers that deposit their bounty into either the Snake or Columbia. For example, the Lower Columbia is made up of the Walla Walla, John Day, Deschutes, Sandy, and perhaps a few others. When all four of this point upwards the runoff has begun; for now, they all point downwards. Runoff has not begun.

Northwest reservoirs continue to be drafted, per yesterday’s flood control some will get drafted even deeper:

Dworshak has 66′ to go; Libby 52′, and of course Coulee has a modest 16.7′ feet left. The Libby draft might create some issues for BPA if things warm up. Those 1240 QGs at Coulee might be short-lived.

Before departing the wonderful world of Hydro, let’s look at the Flood Control:

You have all seen this already, but we think it’s worthy of one more look. The highlighted years are those where Coulee was drafted to 1220’ish, there have been four in the last 19 years and this year is one of them. At some point that snow is going to melt, for now, it seems to just keep building.

TransGen

Flows out of ZP are back to northbound and Powerex realized its biggest exports yesterday in the last two weeks. The AC and DC are mostly full southbound, that won’t change.

SP had a rally in gas outages.

Lots of new outages and just a smattering of returns:

Conclusions

We see signs of life, do you? We think you are, given how you’ve bid up the BOM:

April
- - MIdC – given that we are in a massive water year (see Flood Control above) it just feels counter to common sense to be long, but long aint wrong, of late. We were long this on Monday and got paid. We won’t liquidate just yet; we want to see what happens to real-time with 140k QG at Coulee
    - LONG HL
    - LONG LL – perhaps BPA can play some shaping games now that they have some new flexibility?
  - Palo – that’s a nuts chart, its like the market was caught by surprise when the nuke came down. The system is flush with energy, that kind of irrational exuberance is, well, irrational. There are still 2-3000 MWs of cheap gas units not fired up
    - HL – SHORT
    - LL – SHORT
  - SP15
    - Rally there, too, we had a short on off on from Monday and got paid
    - we think we’ll get paid some more
      - HL – SHORT
      - LL – LONG
May
- - Palo soars, why? From the momentum off of rallying from the stupid lows from a few weeks back; its the trade everyone has made money off of. Given it is at a contract high we can’t own it
    - HL – outright short
      - SP&MIDC – same position as MOnday
June
- - There will come a time where shorting June MidC will pay, but not just yet. We’d like to see the market rally it up some more before we put that on, for now MidC seems range-bound
    - FLAT
- SP&PALO – Flat
July
- - Don’t see any separations to make July a buy or a sell …FLAT