NP Strength

Posted on by William Griswold

Good Morning,

We’ll approach the blog from a hub perspective today.

California

Markets are strong, loads are rallying, and it’s only early May:

As expected, NP separated from SP yesterday on surging NoCal temperatures. All of which is suggesting issues at NP. We know the nuke is down, that adds to net demand, but demand itself surged inside the hub:

Granted, SP rallied almost as much, but on a percentage basis, NP saw a bigger rally.

You will notice a few new plots in our Hourly Load report; these are the Daily, Weekly, and Period averages. All make it much easier to flag the change in demand. Current conditions may be as good as it gets for the ISO, the heat lingers another few days and then makes a major reversal:

Most stations fall 20 degrees, some approach a 30-degree plunge from yesterday and today. Those actual temperatures were warm, but not summer-hot:

Well, we better say warm for everywhere but Palm Springs – that desert mecca baked at 105 degrees, and yes, it did set records yesterday:

Kind of blew past the previous high of 101, and will continue to set records through Thursday. But back to NP, not all of its relative strength (to SP) is explained by loads; the hub also realized a surge in critical power plant outages:

While SP’s outages fell off a cliff, NP’s climbed El Capitan. Kind of a Perfect May Storm for the hub and with a few more days of heat the pressure on the spreads will widen.

See, lots of new units fell to the wayside over the last couple of days. Just when the ISO can use the gas capacity – it goes away, just like the good old days of 2000.

A few units returned, most of these are in SP.

Palo Verde

The Nuke’s out, and gas noms remain relatively robust, at least for May they are strong:

Strong in Kally, too, everywhere saw a jump in gas noms.

Phoenix remains blistering hot, will stay that way for Bal Week, then, like CA, falls off a cliff, plunging 20-30 degrees. One big difference between CA and AZ – AZ hasn’t realized its hottest days:

Those arrive on Thursday and records are made to be broken, and they will be busted this week. It’s a new paradigm; some call it Summer. But all good things come to an end, and that PV unit will be soon approaching the end of its refuel. The market sees that it is starting to sell May; the June-May roll is coming back to life:

Up a buck, we think there is another buck to be had, but you may want to wait for Thursday real-time, or not. Tomorrow the weekend trades, and on Friday they’ll be trading a 25 degree colder Monday. That train is leaving the station; it may have already pulled out on its way to BearVille.

Mid-Columbia

This hub is a bitch to forecast and a bear to trade, but let’s give it a shot by starting with temperatures:

The 80s in Spokane and Boise and 70s in western Montana. The heat is short-duration but is followed by mostly above normals for BOM all of which suggests the melt accelerates, inflows rally, and loads crater (at least Light Load craters). There may be some AC in Mid-C over the next couple of days, not a lot, but still, AC in MAY, come on.

The one report which jumped out today was the same one that leaped off the screen on Monday:

Shyster, those are some draconian cuts, and we’re not sure what’s driving in, though our guess is an aggressive Coulee refill. We already see the start of the refill, we think:

That GCL spike may be noise or may be the sign that BPA is going to fill, worthy of further attention. Moving onto the rivers …

All of the SideFlow Indexes are off due to cool weather, don’t expect that trend to continue, not after the 80s in the hinterlands.

The non-Corps projects are mostly off, though there are signs of a rally. Look at the discharge out of the Cowlitz (regulated). Either Tacoma was an opportunistic seller (in this strength, they should be) or they made some room for a rally in natural river flows.

The regulated projects are changing too. BON is at a 60 day low in spill – we can no longer accuse our federal friends of market manipulation via spill, they don’t need to play those games anymore, the market is just tight off of these low natural river flows, and the fact that they (BPA) gets their shaping back at Coulee. Check out yesterday:

That is a healthy 50,000 cfs swing in just a couple of hours, and also note the daily averages are off about 10,000 cfs. The hub is head-fake tight, at the moment.

Everything would be coming up roses if it wasn’t for Powerex – the Canadians were hard sellers over the last couple of days. Hey, weren’t they buying those $3.00 a few days ago, and now selling $20s? Gotta love those guys, who wouldn’t want to own that system?

Conclusions

  • NP15
    • we’ll stay long the spread to SP
      • The market has rallied this a bit; we think it’s worth a few more $$$
  • SP15
    • We’re going to be short this hub off the spread to NP and will be outright short off of plunging temperatures
    • But we will buy some SP, via the June-May roll
        • That is showing signs of life; we think it’s good for a few more signs of life after temperatures drop below normal.
    • Palo
      • We’re buying the roll;
          • It’s waking up to the fact that June is relatively cheap compared to May
    • Mid-C
      • So much controlled capacity at this hub, controlled by an entity that is exempt from any supervision. We’ve always said, if you are uncertain about what to do, look like BPA. Well, BPA is long and about to get a lot longer, but at some point, even Bernie Madoff couldn’t keep all his rabbits in the hat. Is the hub heading for a “meltdown”? We don’t think so, because of refill. Signs indicate (RFC 10 Day) that BPA is going to aggressively refill Coulee, off of this heat, which is bearish for June.
        • Long May, short June