Summer in May

Posted on by William Griswold

Good Morning,

Was a good week for volatility, a lot of moving parts in the WECC machine, some were moving in opposite directions resulting in a jumble of mixed signals. Let’s see if we can sort out some of what happened.

For starters, NP separated from the pack in the Day Ahead market. More surprising, SP settled over Palo, and it wasn’t that hot in Socal. NP also had the most upward pressure in the term market. Funny how very short-term cash fundies effect markets 30 days, or 60 days, out. There is a trading strategy there; it is where our APT product stalks its prey.

Demand

Let’s start with loads using some new dashboards we added:

A clear delineation between North and South; the latter is way up while the former wallows in the lows.

We now know what 95 degrees in Sacramento will do to May demand, too bad we won’t see that again in May.

Those Palo loads were driven off of just 102 degrees which will seem chilly by July, but there was enough demand for APS to release an all-call on its gas generation:

Most everything was turned on, Harqualah must be out, it was running last year at this time on lower loads. Those noms in Palo are worth a closer look:

Today’s noms are more than a dozen summer days last year. The hub is tight and am sure APS is begging the refuelers to get the PV nuke back early. They may not need to hurry, though, the weather is turning cold.

Those plots, my friends, are suggesting 25-30 degree drops from today and it will take until next Thursday before Phoenix returns to normal:

It will also be interesting to watch light load during this heat wave what with all the gas running, much of it will be in min run mode overnight as price takers.

OK, that is the bullish half of the WECC, now for the bearish north:

The hub saw loads tumble on a very warm day. Interesting that PGE had a load rally, the fine folks in Portland found those high 70s just a bit hot and turned on their ACs – and turned off their heaters at night. That summary table is peak load during the HL hours. Let’s look closer:

See! Here is a live case of swapping Heating load for Cooling load and the net effect is moving load out of night time and into day. This is a short-term phenomenon, the Northwest cools off a bit, too:

Well, we should say it cools off then warms back up, the cool-down is short-lived. Difficult to find the silver lining in the above plots but its there, just not coming up silver for BOM since that warm weather is melting snow.

Hydro

Our dear federal friends in Portland are undergoing a metamorphosis of sorts – where they were naively bullish a few days back; now they are wisely bearish on northwest prices:

The RFC’s 10 Day forecast looks more like the Crude Oil chart of the last few days. Those huge cuts from Monday’s STP we saw on Tuesday and Wednesday have been replaced with increases. This is a remarkable reversal of the reversal given that the weather hasn’t changed that much, yet it bodes bearish for the Mid-Columbia. There is more water coming if only BPA would start filling Roosevelt:

But they aren’t, in fact, they pulled a foot out over the last two days. Let’s see how the regulated plants are running:

Coulee quit shaping but dropped its QG 15000 CFS off of declining inflows, even while drafting a foot. What makes the RFC’s ten day even more interesting is the fact that BPA has burned a week of refill which puts pressure on June. Not that refilling will be a problem in this water year, it won’t, but skipping a week is simply bullish June. Skip another week, which is almost what you think is driving the RFC’s rally, and it makes June more compelling.

We see some rallies in a few projects; Mica spiked up, but we think that is more driven to serve healthy exports; the unregulated projects are all spiking up, that is driven by warm weather.

California’s rivers are up and down; the regulated (Pit, Shasta, San Joaquin) are down as the state makes room for the impending runoff while Cherry Creek, Yuba, and the Merced are seeing sharp rallies which are driven by lots of snow melting quite fast.

It’s coming down in buckets, but lots left, though now most are higher elevation. The Merced stations are now at zero.

Three Side Flow Indexes are down, and two are up; the Middle Columbia index is soaring as the Cascades begin shedding snow.

These are inches of Snow Water Equivalent (SWE), and there are plenty of inches left to go, but the Mid-C’s runoff has begun, and with those warm temperatures next week, it will continue building. Positive temp anomalies in May are bullish for the second half of June and all of July.

TransGen

The ISO gas outage spread remains bullish for NP and relatively bearish at SP.

Just a few units came back, most notably Griffith, while a few more tripped:

The AC and DC are at max with very little hour on hour volatility; BC is selling hard into the MIdC in front of this big impending melt; ZP flows north reflecting NP’s relative strength.

Conclusions

Wednesday’s Recs:

  • May NP-SP HL – long the NP
      • The south sufferes the greatest temp drops and fundamentally grows more bearish than the north; we see no reason to liquidate our long NP over short SP position
  • Short May SP HL
      • The market concurred and sold it down some; we think it might sell it down some more …still short
  • Long June-May SP Roll (long June)
      • Market agreed with Ansergy, why wouldn’t it? We were right, and we think we’ll get even more right after the SP interior plunges 25 degrees and so we’ll stay long the roll
  • Palo June-May Roll (long June)
      • We were big right here too, but bears and bulls make money, pigs get slaughtered … Liquidate
  • MidC June- May Roll (long May)
      • We were even right on this one, which faded the trend, but now we hate the May fundies and will liquidate this.

APT Trades

These are some of the positions the model likes; we haven’t reviewed these but probably worth a look:

Quarters

Months