Good Morning, again.

We had a few hiccups in the Trade Rank, now those are fixed, but we will be re-running our Forecast history later this month to incorporate some changes we’ve made to a few models:

1. Hydro – added 12 new stations to the MidC; now the mainstem Columbia and Snake will be modeled at a station level (versus the old groupings)
2. Stack – we are auto-updating our stack each month off of EIA860-M, this will require a rerun of history each month.
3. Wind – a new model was rolled out this weekend that better addresses short-term wind dispatch.

Now, on to the market.

Position Report

We positioned the front book long ahead of the heat wave then liquidated all length (BOM) on Wednesday (based on Tuesday’s marks), should have liquidated it on Monday, but as things turned the move was the correct thing to do. Now the front of the book is fairly clean, and we can refocus on the opportunities and cease being bullish because we were long. As hard as it is to do, we’ve always been a fan of taking a book flat a couple of times a year. It is kind of like sweeping out the dust balls from under your bed.

Outrights

August

The markets tanked, especially so at PV and MidC. Perhaps too much so at the latter given the very tight water, but the upside in Northwest length is limited without extreme heat. We’ll hold off on any BOM outrights and go to the derivs for clarity.

Less downward movement in the off peak rendering the short On|Offs the trade de jour, last week. The ISO off-peak seems a shade too robust given the big water and moderate demand. That said, it’s not that compelling.

September Outrights

While BOM fell apart, the Sep actually rallied a bit leaving the long rolls a great trade (long sep, short bom).

Less enthusiasm for the Sep LL, suggesting the on: off may be growing rich, let’s find out.

On:Off

A crash, but too be expected given the similar move in degree days; now the market is trading near its historical range for all hubs except MidC. We think that is a blunder given more Coulee drafting and an overall tight market. Recall this morning’s Coulee report:

On peak, water didn’t change, but off peak soared nearly 50% higher.

Buy Aug MidC HL, Sell Aug MidC LL

Both Palo and SP15 are approaching contract highs while MidC bounces at its low. We concur with SP, not sure we agree with PV as much. MidC will be losing its Spill on Sep 1; which hour type will be most impacted?

This table shows the % of spill by plant by hour type. These are mostly about equal, though there is slightly higher %  during the off-peak. The question is, which hour type is more elastic to new energy?

This report suggests the price impact of increasing 2500 aMW of off peak hydro has relatively no affect on price – because of the stack. The on-peak is a bit more sensitive to new energy.

The loss of spill, assuming 2500 aMW of new energy, would drive prices down around $2.00. The takeaway is the on is more sensitive to the cut in spill than the off, something that seems a bit counter-intuitive, but is proof enough for us to pass on the trade. The PV, though, is interesting:

Buy Sep PV LL, Sell Sep PV HL

Spreads

The market is at contract-highs in the SP:PV and has sold off the SP: NP while the SP: MidC is still rallying. We left 75 MW of the latter on, we’ll keep it on given the current market strength and weakening CA loads.

The SP: PV offpeak spread is at a contract high and we’ll short that.

Sell Aug SP LL, Buy Aug PV LL

September Spreads

The Sep SP|PV has plummetted from its contract highs and is approaching value. Since we sold the Aug, we’ll buy the Sep. The SP|MC is also near its highs, but we have it on in BOM and don’t want to get too short SP.

Buy Sep SP HL, Sell Sep PV HL

Same blowout in the offpeak SP|PV, but have it on the in the heavy and will pass. Nothing else interests us.

Rolls

Sep to Aug

Massive reversals in the HL, maybe too much at the Palo and we’ll fade it even though its catch a rallying knife. MidC also seems a bit overdone (ignore the forecast, we are), especially in light of spill ending.

• Sell Sep PV HL, Buy BOM PV HL
• Sell Sep MidC HL, Buy BOM MidC HL

 

LL just reversed its blunders, pass.

The SP Oct|Sep is cheap, historically, and with no  big loads on the SP horizon it may be a good time to take piece of that. The other three seem at value.

Buy Oct SP HL, Sell Sep SP HL

The NP LL roll is a contract low and make no sense given that WY17 is such a bad-ass water year. The odds of that WY getting worked out by October are greater than September.

Buy Oct NP LL, Sell Sep NP LL