Texas is in store for electricity price volatility this summer, PJM continues to reduce emissions...
Following the theme of last week, fuel prices (natural gas and oil) continue their downtrend, dragging down electricity prices. ERCOT (Texas) however, last week stated they could experience price spikes again this summer, as they did last summer. PJM reports that emissions continue to decline year over year in their footprint. Above average weather east of Rockies continues into March.
The April 2020 NYMEX Henry Hub traded down to $1.827/MMBtu, a $0.01 (-0.5%) decrease from the previous Wednesday. The price of the 12-month strip averaging April 2020 through March 2021 futures contracts declined $0.01 (-0.6%) to $2.157/MMBtu.
For the week ending February 28, the EIA reported net withdrawals from storage of 109 Bcf, which is lower than last year’s net withdrawals of 152 Bcf for this week and higher than the 5-year (2015–2019) average net withdrawals of 106 Bcf.
Working natural gas in storage totaled 2,091 Bcf, which is 680 Bcf (24.5%) higher than last year’s working gas totals of 1,411 Bcf at the same time and 176 Bcf (9.2%) higher than the 5-year (2015-2019) average of 1,915 Bcf. Total working gas is within the five-year historical range.
Power pricing in the major northeast trading hubs and associated load zones were flat to slight lower week over week but moved up across the board to start the new week. Prices in NYISO and ISONE were down less than 1.0% week over week for all short term strips and out to Calendar 2021 for on-peak strip pricing. PJM was the exception but was only up slightly, less than 1.0%, week over week and touching lows coming out of our record warm winter period. In ERCOT prices moved week over week and in reaction to the 2020 summer assessment release and prediction of a new peak demand this summer. Houston summer 2020 on peak pricing was lower week over week with some strong movements to start the week.
Northeast pricing is stable and still touching lows heading out of our warm winter. You have time to review and run a few summer demand scenarios to adjust hedge positions before summer forecasts are published and start to move shorter term price strips. Summer reserve margins are still tight down in ERCOT so need to stay on top of your position and view any large pull back in summer pricing a good opportunity to further hedge summer exposure. Contact TrueLight to stay on top of value in current forward curve pricing and learn more about our portfolio management execution expertise.
Eversouce has added 330,000 natural gas customers by the acquisition of Columbia Gas from NiSource. The Massachusetts Department of Public Utilities will need to approve the acquisition and the resulting rate plan. The assets are considered controversial due to the explosions that occurred September 13, 2019 in Merrimack Valley that resulted in a 143 million class action settlement to Massachusetts residents. Eversource will have the second largest gas distribution assets in Massachusetts after National Grid.
Still see some short term headroom value in the northeast markets and currently in the United Illuminating territory of Connecticut you should have residential headroom in the shorter periods for contracts with 3 and 6 month terms. Headroom of $0.01425/kWh and $0.00754/kWh is likely for these periods, respectively. Let TrueLight help you stay on top of current rates and subscribe to our PTC tracking and headroom reporting or use our price verification service to ensure you stay on top of all utility rate changes.
On March 4th 2020, PJM put out a press release about the continued downward trend of Carbon Dioxide (CO2), Sulfur Dioxide (SO2), and Nitrogen Oxides (NOX) emissions within the PJM’s grid footprint of 13 states and the District of Columbia. Average emission rates have steadily fallen over the past 15 years. The entry and growth of new supply resources (cleaner gas generation and renewable), as well new technologies (demand response and energy efficiency) have contributed to the reduction of emissions. To learn more about renewable resources (including wind and solar), demand response, and technologies (such as battery storage) please contact TrueLight. Contact us for advice and valuation modeling on all your clean energy generation development projects.
Texas could be in store for electricity price volatility again this summer. On March 5th 2020, ERCOT (the independent system operator for electricity in Texas) issued a news release on expectations for record electricity usage this summer. ERCOT also issued their “preliminary assessment for the summer season” report. Summer 2019 in ERCOT had tight generation to load balance which resulted in very strong electricity prices. ERCOT expects similar grid condition this summer 2020. This summer 2020, ERCOT expects to have 82,417 megawatts of generation available to meet a peak electricity load forecast of 76,696 megawatts. Contact TrueLight for strategic energy market support and analysis of the most up-to-date energy market news or use our price verification service to ensure the most recent market shifts are reflected in your forward price assumptions.
Below average temperatures are forecast for the western continental U.S. in the 8-14 day window starting March 14th running through March 20th. The highest probability for cool anomalies are along the West Coast and in the northern Rockies. Conversely, East of the Rockies is expected to see above normal temperatures for 8-14 day forecast (March 14th – 20th), with the highest chances for much above average warmth in Mid-Atlantic, Northeast and the Ohio Valley.