Natural gas prices slid last week, and power prices were mostly flat to slightly up in some markets. MISO Capacity price for DTE Consumers Michigan zone clears at the new entry price of $257/MW-day. Virginia governor signs Virginia Clean Economy Act. NYISO details COVID-19 demand impacts. California, Texas, Florida and most of the southern United States are forecast to see above average temperatures into the end of April. Meanwhile the Great Lakes and Northern New England are forecast to see below normal temperatures.
The May 2020 NYMEX Henry Hub traded down to $1.598/MMBtu, a $0.19 (-10.4%) decrease from the previous Wednesday. The price of the 12-month strip averaging May 2020 through April 2021 futures contracts fell $0.05 (-2.1%) to $2.299/MMBtu.
For the week ending April 10th, 2020, the EIA reported net injection into storage of 73 Bcf, which is the same as last year’s net injection of 73 Bcf for this week and is higher than the 5-year (2015–19) average net injection of 27 Bcf.
Working natural gas in storage totaled 2,097 Bcf, which is 876 Bcf (72%) higher than last year’s working gas totals of 1,221 Bcf at the same time and 370 Bcf (21%) higher than the 5-year (2015-2019) average of 1,727 Bcf. Total working gas is within the five-year historical range.
Power pricing shrugged of the crude pricing volatility and in most of the northeast power hubs and zones moved slightly higher week over week. The price movements higher still need to be taken with some perspective, as we are still sitting at multi year lows on all terms, and over 50% lower on 2020 summer pricing terms year over year. We expect to have few days or short periods where pricing will bounce higher as the market is looking for any reason to move prices higher but can't be sustained in this environment.
Most northeast power terms were up, less than $1.00, from last week and winter pricing for the 20/21 term picked up the largest gains and moved up closer to $1.50 week over week. In ISO New England you had winter terms priced over $57 again but all the summer 2020 northeast pricing remains well below the $30 price level. In ERCOT power pricing moved against northeast trends with pricing down week over week. The ERCOT summer strips dropped week over week, down almost 10% in some locations, as the market starts to price in the longer term demand destruction and summer reserve margin levels.
Guidance remains the sames as expect pricing to trade in a tight range over the next month. Stay flexible in your hedge timing and possibly come out to market a few more times each month to be able to pull back on those days when prices may move higher. In most of the main de-regulated load serving markets the stay at home orders have been extended and school closings confirmed for the rest of the academic year. Non-residential demand will continue to be at suppressed levels through the end of May and most likely continue into the early part of the summer 2020 demand season. This will lengthen the time of very low hourly clearing prices in each of the ISO markets and help keep a lid on power curves moving much higher over the next month. Still would like to see slight risk premium or hedge cost on forward curves to protect against execution risk in this work from home environment, just don't tell the sales force where this recommendation was coming from. Contact TrueLight to stay on top of value in current forward curve pricing with expert hedge strategy recommendations and learn more about our portfolio management execution expertise.
Headroom in the CEI - RS territory of Cleveland Electric in Ohio is now available in the shorter periods for contracts with 3 and 6 month terms. Headroom of $0.00539/kWh and $0.00347/kWh is likely for these periods, respectively.
The Midcontinent ISO (MISO) cleared its capacity auction and posted prices for the 2020-2021 delivery year. Ameren Illinois zone 4, was up 67% from the previous years price to $5.00/MW-Day for the 2021-2021 capacity period. DTE Consumers zone 7 in Michigan skyrocketed to $257/MW-day for the 2021-2021 capacity period. MISO cited insufficient zonal capacity to meet the local clearing requirement, therefor the price was cleared at the cost of new entry. That region of Michigan was deficient capacity and the clearing price was set by the cost to build a new generating unit. Let TrueLight help you stay on top of all utility and market 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 and market rate changes.
The governor of Virginia (Ralph Northam) signed the Virginia Clean Economy Act and is planning to have the state join the Regional Greenhouse Gas Initiative. The law will require Dominion Energy Virginia to be 100% carbon-free by 2045. Also, nearly all coal generation must be closed by 2024. Targets for renewables are set as follows: 16,100 megawatts of onshore wind and solar, as well as 3,100 megawatts of energy storage capacity. Contact TrueLight Energy for renewable asset management services.
The New York Independent System Operator issued a press release last week detailing the demand impact from COVID-19. Other Grid Operators have issued similar reports, but this one comes from NYISO, which includes New York City, one of the most impacted regions. NYISO reports that demand reduction is greatest in the morning, with 8AM in NYC showing an 18% reduction in electrical consumption versus typical demand levels. NYISO reported that the reduction in demand is from less usage from commercial customers. Residential usage has shown an increase. Rich Dewey the CEO of NYISO stated: “Even when normalizing electric consumption data for weather, we have seen daily energy use down by nearly 8% during the last two weeks of March and into the first week of April.” 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.
Normal temperatures are forecast for the Midwestern States in the 8-14 day window starting April 23rd. The highest probability for relatively cool anomalies are along the Great Lakes regions and northern New England. Conversely, California, Texas, and the Southern United States are expected to see above average temperatures, with the highest chance for warmth in Florida.