Good Morning,
No point in titling the post “something bearish,” we’ve been banging that drum for the last couple of weeks. Bearish it is with some modest signs of “bullishness,” those you have to look for and be creative and generous.
Spot markets were off from the heat two weeks ago; they are now mired in a range where we don’t see them breaking out, either way, for the foreseeable future. The Northwest is a month away from seeing temperatures drop enough to drive rallies, California is cool but we think another heat wave hits the lower half of the state sometime before winter sets in, and Palo remains warm but is about to realize the coolest weather since April.
The gas market has returned to normal; the two Citygate prices are about $0.30 apart. Interesting to see Palo trade flat to the ISO and should make for some good fade opps in today’s market walk.
Demand
We switched to Minimum Temperatures for the northwest this week. Heating load, from this day forward, will drive the Mid-C, but there is no heating load to speak of in these forecasts, aside from the 30 MW in western Montana. The load centers cool, but are more comfortable than anything else. Check out these realized temperatures from yesterday:
The northwest cities lows are almost the same as the highs, call that temperate. Call the high of 70 in Burbank awful for loads, and the 67s in San Jose are cool as well.
California
This week will be a yawner, especially after those roller coaster rides from two weeks back. We see signs of new heat for the week following and will be watching closely to see if they hold, or better, build. The mid-90s in Burbank would throw the proverbial monkey wrench into the machine.
Interior
Phoenix remains warm, still flirting with 100s, but later in the week the city will get its first heat reprieve in four months, yet another rally seems set for the following week. Salt Lake City has lost all of its AC load, so has Denver, and neither is cool enough to drive much if any, heating load. Without the alignment of all WECC load centers stressed, the entire system is going to be awash in idle capacity setting the proverbial ceiling on markets. The only good news about cool temps might be accelerated planned outages.
Generation
SP saw a bump in its gas units offline, though we’d argue it doesn’t matter given the massive amount of capacity that is offline for economics:
Oh my, noms are back to spring levels inside the ISO, and Palo is close. The MidC remains the strongest, nom-wise, of the hubs primarily because water is tight (see hydro).
That SP outage spike was driven by High Desert dropping 830 MW. After running hard for most of the summer, am sure there is lots of deferred maintenance at lots of plants and what better time to do that work when you know your unit wouldn’t be called, or if it did, your margin would be small.
While demand took a nosedive, wind soared inside the ISO rendering a very weak weekend. Not at the Mid-C, the wind there vanished.
This interesting set of charts plot three large PV gas power plants by hour for the last week. It looks like New Harqualah shut down its boiler and is running just a couple of the CTs. This cut has a bigger impact on LL than HL given that HL demand has fallen further, hence our thought on shorting that ON|OFF.
Hydro
The Feds are doing lots of shifting; they jacked flows for a few days in the front then cut massively in the back of the ten day. I told you water was tight in the Northwest.
Coulee daily discharge is off, week-on-week, and the reservoir is unchanged.
Mica has steadily cut outflows, so has Arrow, and flows at the border are approaching record lows (five year). Discharge on the Peace River complex is at highs.
California Rivers
The Pit continues to set record production, but we noted the Cherry Creek projects have dropped, dramatically; so has the southern end of the Sierras as reflected in the Merced group.
Total energy in the ISO remains at record levels, but is steadily falling, yet has long ways to go. Do note the nearly 1000 aMW cut in average on peak hydro, week on week.
Transmission
The Northern Intertie has steadily exported less but is still averaging over 1000 MW into the northwest. The DC line is hitting TTC limits, and both the AC and DC barely offered up any energy for HE09-13 yesterday, which coincided with the big wind in the ISO.
Conclusions
It is weak this week, next week might have some ISO load surprises, and Northwest water remains tight. We’d expect a modestly bullish STP today. Please read our APT-Front post to follow to get our take on the markets.