Northeast natural gas prices rise, FERC approves PJM storage proposal

Natural gas prices rise in the Northeast. FERC accepts PJM and SPP energy storage plans while requesting additional information, cooler weather into first week of November, and new PTC rates for FirstEnergy utilities in PA.



General Update

  • The November 2019 NYMEX Henry Hub forward contract climbed to $2.303/MMBtu, a $0.07 (3.1%) increase from the previous Wednesday. The price of the 12-month strip averaging November 2019 through October 2020 futures contracts increased $0.01 (0.4%) to $2.377/MMBtu.

  • Natural gas prices rose in Northeast markets. Boston’s Algonquin Citygate prices increased $0.27 (15.3%) to $2.03/MMBtu last Wednesday. Transco Zone 6 NYC prices increased, rising $0.47 (29.9%) from $1.57/MMBtu to $2.04/MMBtu.

  • Pennsylvania’s Dominion South increased $0.42 (30%) to $1.82/MMBtu. Tennessee Zone 4 Marcellus spot prices increased $0.41 (28.1%) to $1.87/MMBtu.

  • California prices were mixed since last week. SoCal Citygate prices dropped -$0.31 (-8.7%) to $3.27/MMBtu last Wednesday. Prices at Northern California PG&E Citygate held constant at $3.25/MMBtu week over week.

Power

  • For the NYC zone (J) in NYISO, the 12 Month ATC strip decreased -$0.40 (-1.1%) to $36.75. The 24 Month ATC strip decreased -$0.22 (-0.6%) to $37.39 and the Cal 2020 ATC strip decreased -$0.60 (-1.6%) to $37.45.

  • For the NEMASSBOST zone in ISONE, the 12 Month ATC strip decreased -$0.46 (-1.1%) to $40.81. The 24 Month ATC strip decreased -$0.24 (-0.6%) to $41.39 and the Cal 2020 ATC strip decreased -$0.23 (-0.6%) to $41.59.

  • For the PEPCO zone in PJM, the 12 Month ATC strip increased $0.18 (0.5%) to $35.31. The 24 Month ATC strip increased $0.09 (0.3%) to $34.47 and the Cal 2020 ATC strip increased $0.07 (0.2%) to $34.87.

  • For the Houston zone in ERCOT, the 12 Month ATC strip decreased -$1.02 (-2.4%) to $42.41. The 24 Month ATC strip decreased -$0.29 (-0.7%) to $40.58 and the Cal 2020 ATC strip decreased -$0.41 (-1.0%) to $42.79.

Utility Highlight

  • The upcoming Price to Compare for Massachusetts’ Massachusetts Electric Company (MECO), dba National Grid, Small General Service rate class (G1) is $0.13982/kWh, in effect for the period November 1, 2019 through April 30, 2020. This rate is a 29.5% increase from the current rate of $0.10793/kWh for the May 1, 2019 through October 31, 2019 price period.

  • Headroom is now available in the MECO territory for the 1 and 12 month terms, with $0.00469/kWh and $0.00518/kWh of likely headroom for the 1 and 12 month contracts, respectively.

  • Over the last week, the NEMASSBOST ATC 12-month strip decreased slightly, ending at $40.81/MWh yesterday. This time last year, the strip was trading at $47.47/MWh, which is 16.3% higher than this year.

  • Since the beginning of the year, the ATC strip has reached a high of $48.44/MWh on January 17, 2019 and a low of $38.59/MWh on July 5, 2019.

Natural Gas

  • For the week ending October 11, the EIA reported net injections from storage of 104 Bcf, which is higher than last year’s net injections of 82 Bcf for this week and higher than the 5-year (2014–18) average net injections of 81 Bcf.

  • Working natural gas in storage totaled 3,519 Bcf, which is 494 Bcf (16.3%) more than last year’s working gas totals of 3,025 Bcf at the same time and 14 Bcf (0.3%) more than the 5-year (2014-2018) average of 3,505 Bcf. Total working gas is within the five-year historical range.

Supply and Demand

  • Average total supply of natural gas remained the same week/week. Dry natural gas production increased 1% while net imports with Canada decreased 6% compared with the previous week.

  • Total US consumption of natural gas decreased by 1% since last week. Consumption for power generation decreased 7%, industrial sector consumption decreased 2%, residential-commercial consumption increased 22%, and exports to Mexico decreased 3%.

  • US LNG exports decreased week/week, with ten vessels departing US ports for a combined 35 Bcf.

Market Intelligence

  • The Federal Energy Regulatory Commission (FERC) approved the orders of PJM and SPP to implement FERC Order 841, which directed independent system operators (ISOs) to establish rules for electric storage participation in their wholesale markets. Order 841 intended to break down barriers to storage participation in wholesale capacity, energy and ancillary service markets, and now both PJM and SPP’s rules to allow storage participation have been approved.

  • However, FERC asked both ISOs to make additional filings within 60 days to address minimum discharge duration requirements for resource adequacy and capacity. PJM proposed that storage resources in the capacity market be assessed on their discharge over a ten hour continuous run-time, which the Energy Storage Association sees as a barrier to entry for some electric storage resources. Additionally, FERC directed PJM to address its metering and accounting rules regarding storage participation in both retail and wholesale markets.

  • FirstEnergy’s Pennsylvania utilities have filed new price-to-compare (PTC) rates for residential customers. The new residential rates are not finalized and will be effective for the period from December 1, 2019 through February 29, 2020. The residential rates in Met-Ed, Penelec, Penn Power, and West Penn Power will all increase relative to the current rates. The proposed rates are 6.510 cents/kWh in Met-Ed, 6.445 cents/kWh in Penelec, 7.572 cents/kWh in Penn Power, and 5.760 cents/kWh in West Penn Power.

Weather

  • Colder than normal temperatures are coming to most of the country in the 8-14 day window. Below average temps are predicted for the area covering the West Coast east through the Midwest and up to New England, with the coldest anomalies centered in the northern Great Plains. The cold will avoid parts of the Mid-Atlantic and the Southeast, which is expected to be warmer than normal.

  • The beginning of the 8-14 day window will bring drier than normal conditions to the West. However, a storm system will bring precipitation to yield about average precipitation levels during the latter portion of the window. Wetter than average conditions will cover the South and the Mid-Atlantic from Texas east into Georgia and Virginia.

  • As winter approaches, cold weather forecasts carry the potential to add short-term price volatility to energy markets, as we experienced last November. With strong natural gas storage numbers and a generally warm winter forecast, the fundamentals are bearish for winter electricity prices. However, short-term weather outlooks still have the ability to raise prices in the short-term, and Truelight will continue to keep an eye on these developments as we get closer to winter.

© 2019 by TRUELight Energy LLC

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