Good Morning,

The news of the day is scorching heat in Portland; we’ve been whining about the 80s in the City of Roses. Well, the power gods heard our whimpers and have delivered 105s. Brace yourselves, the heat falls in the middle of the weak and is good for 2-3 days, but these events have been known to linger. The Northwest is also finding itself a bit short on energy, hydro-wise, as the rivers are looking weak.  The rest of the WECC is warm, not hot, so not the perfect storm of bullishness, but close.

The latest NWS doesn’t linger, the heat arrives on Tuesday and leaves on Friday, watch tomorrow’s (or today’s 12Z) to see if there is an extension or build. Even if there isn’t, this week will be tight. The ISO bars are interesting …

Big highs are pulling up the Southwest heat into the Northwest; even BC gets baked. Contrast today’s 500mb with last Wednesday’s:

Last week we saw an off-shore low that brought on-shore flows to the Northwest; now the high has pushed that low back to Alaska where it belongs. For those that don’t like isobars, here is the same in the 8-14 day:

Today

Last Wednesday

Easier to read, but not as impressive, IMO. What giveth shall be taketh; in this case that Pacific High is allowing a Central USA low to drop in and will crush this week’s demand, probably smoke the Nymex for the next few weeks. Good for WECC heat rates, not so good for the outrights.

California is hot, coupled with a tight Northwest, should make for some substantial cash. The back of these charts is bleak, but for now, we’d stay long and see how high high is.

Palo gets a green circle because there aren’t any days above normal, contrast Phoenix with LV where the latter realizes almost every day above climo. A few blue circles in the interior, Denver, and Alb, both drug down by those Central USA lows.

Loads are mostly up for the traded hubs, week-on-week. Expect MidC to soar; our model is suggesting about 4000 MW higher than our forecast from a week ago:

This heat will come as a shock since this weekend’s temperatures were just mild, delightful for your outdoor activities, but not too helpful for your long positions.

Hydro

This fundamental is worthy of a moment of your attention, even though it will be August tomorrow. Both the Northwest and California had big water years, let’s see how the two are faring on July 31, water-wise.

The above is a new dashboard; it shows the ISO by fuel type (and demand) over the last four years. Water in CA is still off the charts healthy, especially in the on peak; the off is “off” about 800 aMW from its high, the on is back to its season highs. Solar, of course, is well above historicals but Imports are down, loads are down, and wind is also slightly below prior year levels.

That’s the plot for the ISO Off Peak Hydro; the circles are the same date for previous years. The CA hydro overhang is still hanging around and looks like it will stay that way for most of the summer.

The Pit is setting 5-year highs, though it is shaping; Cherry Creek is also at highs; the rest of the stations are mostly above normal, but we find it interesting that the Sacramento is below normal. The state is husbanding its water, preparing for the inevitable droughts of the future.

MidC Hydro

The same can’t be said for the Northwest; we think BPA has a volume problem. Let’s start with reservoirs:

Not a big change, but 2017 is below 2 of the last three years, KAF-wise, and tied with 2015. Interesting, because this year was a more significant water year than any of those.

Coulee is now down to 1284 and heading into 106 degree days at Portland, OR. We’re confident that the pond will get pulled more to serve load, or we’ll see CA exports cut. Don’t expect any more love out of BC, they already are exporting 1500 aMW and should see spikes in their own loads.

Speaking of spikes, look at the drafts on Arrow – storage water is being pulled hard as BPA scrambles to keep the lights on. Also note the run of river charts – Upper Kootenay, Cheakamus – all below normal. This week’s heat will knock these down even more.

This basket of Northwest stations further underscores the low water levels in the Northwest; all the red triangles are below normal; just two are above.

Even with the Arrow draft, the average discharge at Coulee fell yesterday. One would think BPA would be filling GCL to meet this week’s loads, but it’s not.

TransGen

Trump may have banned TransGen from the armed services, but we haven’t, we like TransGen, especially when it’s bullish.

ISO outages (gas) picked up a notch, but all of that occurred at NP; SP remains near historic lows.

A few new units are offline, only one returned:

Gas Noms are starting to heat up in the Northwest:

The MidC is close to running out of new gas units to fire up:

Check out Current (CUR); everything is running. Now fast forward to Thursday when Portland OR is 106 degrees (from the mid-80s this weekend and last week). We’ve suggested an additional 4000 MW of peak demand, where is that new energy coming from? Two likely candidates:

1. Hydro – lots of idle capacity, just not lots of water. Expect the reservoirs to take a big hit this week rendering BOM and Prompt a bit more bullish, perhaps even Q4.
2. Transmission – Don’t expect BCH to send much more, they’ll have their own demand issues to manage, plus the line is shipping 1500 aMW into MidC already. That only leaves exports to CA, and there are lots of those:

Cuts to the ISO seems to us as the only viable means of coughing up another 4000 MWs. Of course, that only shifts the problem to the south and only makes the ISO bids all that much higher, and all that more tempting to sell into those CA markets. Should make for a fun week.

Conclusions

Long ain’t wrong.

We’ll be publishing an APT update shortly.