Good Morning,

Sometimes taking a few steps back, or in my case moving 4000 miles east, provides a refreshing and different perspective on reality. Sadly, I haven’t been able to stay abreast of WECC developments as the internet and available time have been spotty; today, however, I was able to take a gander at a few reports.  Here are my takeaways.

Demand

The big flare-up in wecc temps has flamed out, now the coastal cities are struggling to stay normal, but that oven called Phoenix remains on Broil, and its residents are all checking out real estate in Fairbanks.

The heat lingers into Q3 at both LV and PHX, but loads are decaying, so much for the retentive nature of heat:

Yesterday’s AZPS loads were lower than either Saturday or Sunday, and the utility’s actuals are coming in below their forecasts:

Looking westward, we see more bearishness than not:

What little heat the CA cities are now realizing dissipates into below normals by the weekend.

Peak loads are off 7000 mw from a week ago, and will drop more as the state cools down. More telling is the forecast miss on the hottest day; the ISO itself over-forecasted by 4000 MW – ouch.

The state’s L&R summarizes the dismal ISO reality fairly well:

Loads down, imports up, nuke back, wind up … at least hydro is down, albeit 300 mw. Ugly, huh? Market thinks so …

That’s some serious whipsawing and that one day of good cash didn’t cover the pain of owning the bom; too bad it’s expiring, it might actually be a buy now.

The Northwest temps also plummet over the weekend and don’t look much better further out. If there are fireworks on the Fourth it won’t come from WECC power prices.

Hydro

Most telling of the hydro plots, that we observed, was the discharge at Coulee:

Massive shaping taking place; the off peak is being cut, yet one couldn’t tell that from where the dailies are clearing. That too shall pass, just look at the delta water on HE04 from this morning versus a few weeks back …. 130kcfs. Remarkably, these cuts are taking place without any refilling of the reservoir:

I guess BPA is not too worried about that last five feet, though it has but a few days to realize its 1290 targets.

Perhaps that is why the RFC has shed nearly 5000 amw of water equivalents out of its 10 day forecasts during those first couple of July days?

Inflows into Coulee have stumbled, most of the cuts are coming from the US Pend Oreille and Kootenay; those rivers are dropping in sympathy with a rapidly disappearing snow pack:

2017 is now about half of what 2014 was on the same day.

TransGen

The noms at SP15 caught our eye; one would have expected those to follow loads, but they aren’t. And outages are weakening:

There is nothing anomalous about the gas outages in the ISO, they are perhaps even a touch higher than normal.

 

With DC troubles the AC becomes fully loaded, no shaping taking place there. BCH is shaping, however, but only when it wants to sell, otherwise there isn’t a Canadian bid for MidC. Interesting to see howh much energy flowed south, on Path26, a few days ago; now the line sits unused.

Conclusions

No strong convictions on the front, but it’s worth a look:

The market is bidding up the Palo in sympathy with cash and projected loads; the roll out of bom paid well. Without weather there isn’t much to get excited about in the ISO, at least the MidC is going to see ever-declining hydro.

• SP – short, need load, don’t have any load and the snow is not all melted (see Yuba), but naked is more daring than we like, so take a look at the roll:
  • 
    • Contract low and bounced off that low. With weak outlook for next week we’ll buy this roll (Buy Aug, sell July) and wait for some Lala land heat.
• PV – hard to short outright given 14 days of above normal forecasts. That said, the gas noms are way off and loads are down even though the hub is 10 degrees above normal. Like SP, worth looking at PV from a roll’s perspective:
  • 
    • OMG – too bad we were climbing the JungFrau the day the roll hit -7; that is a sick looking chart; since it has bounced we’d expect recovery back to the -3, maybe -2
      • long aug, short jul
• MidC; since we’re rolling in rolls, let’s roll into the northwest’s roll
  • 
    • no irrational exuberance here, if anything it is fairly priced. We like where MidC is going water-wise and BPA still has to add six feet to the reservoir and loads aren’t going to decay much … why not naked long July? Because we lack conviction, so let’s look at the on/off:
      • 
        • Not that this chart grabs you by the throat and squeezes, if anything it will lull you to sleep. That said, the product is  near a contract high and we are getting confirmed water shaping out of the LL …so we will:
          • short the HL and buy the LL

A couple of other trade ideas we’d like to share:

Seems the market has built in some big HL premiums for the entire Q3 at PV and SP. Both are at or near contract highs. Perhaps rigtfully so; the SP still has a lot of LL water to work through:

Despite a majority of snow pillows clocking zero’s, the state is still generating 2000-3000 aMW more energy in the off peak this year than anytime in the past five years. Reservoirs are full, solar is much higher … we don’t expect any near-term reversal in LL’s bearish state.

Palo would be a more likely candidate to short (buy LL, sell HL) except for the obvious fact you’ll be risking another $100+ HL day which will wipe out any profits. Better to hold off on this trade until you see some normal temp forecasts at phoenix.

LOL, we talked ourselves out of those trades.

Every extreme cash event sends ripples through the forward curve; the recent Palo heat has destroyed the Q4:Q3 roll. Even the SP is bouncing along contract lows.

Long Q4, short Q3 at both.

If you’re paranoid about July you can play the intra-Q. The sep has been pounded, relative to the Aug at all four hubs. If anything, in a wet year, the SEP should be worth more.

Long the sep, short the aug in all four hubs.

Back to the Griswold’s European Vacation; today we are meeting the Pope for lunch.

Cheers

Mike