Energy Market Update

By The Numbers:

• NG '23 prompt-month NYMEX settled at $2.64/MMbtu, unchanged on Monday, September 25. 
• WTI '23 prompt-month crude oil closed at $89.68/bbl., down $0.35/bbl on Monday, September 25.

• The Energy Information Administration (EIA) reported an injection of 64 Bcf into underground storage for the week ending September 15, 2023. Inventories are 3,269 Bcf; gas inventories are 183 Bcf greater than the five-year average and 410 Bcf greater than the same time last year. 

Weekly Power Report:

Great Lakes Electric Summary

• The Great Lakes Region forward power prices were relatively unchanged this past week except for some weakness on the back end of the price curve for 2027.   With mild weather expected into October, offering little indication of the arrival of early season cold, Nymex futures continued their slide lower, yesterday, despite a higher open as traders turned their attention to the looming front month expiration this week.  Forward power prices through saw no real change week-over-week, while 2027 decreased about -1%.  The entire 2024-2028 term, on average, is -12% lower than this time last year but still +61% higher than all-time lows for those contracts.  Compared to the all-time highs for those years, prices are -20% lower currently.  Index prices continue to be soft with lower spot gas prices with prices about -8% lower, on average, month-over-month.  In COMED, the month-to-date settlement price for September thus far is $27.09/MWh or -79% lower than last year’s monthly average, while the month-to-date settlement price in the AdHub is $28.91/MWh or -63% lower than last year’s monthly average for September.  In Michigan, the month-to-date settlement price thus far is $30.56/MWh or -62% lower than last year’s monthly average, while the month-to-date settlement price in Ameren is averaging $29.55/MWh or -62% lower than last year’s monthly average for September.
• FERC/NERC Staff Present Key Findings and Recommendations on Winter Storm Elliott Grid Operations - On 9/21, FERC and NERC staff presented key findings and recommendations of the Joint FERC/NERC/Regional Entity Inquiry into the operations of the bulk-power system during Winter Storm Elliott.  The key findings include the following: (a) 90,500 MW of generation experienced outages, derates or failures to start, representing 13% of the U.S. portion of the winter 2022/23 anticipated resources in the Eastern Interconnection. (b) Of the 1,702 individual generating units experiencing outages, derates, or failures to start, 825 were gas-fired generators, whereas only 7 nuclear units experienced incremental unplanned outages and derates.  55% of the gas unit outages, derates, and failures to start were caused by freezing issues (31%) and fuel issues (24%).  The remaining 41% of outages were caused by mechanical/electrical issues that were correlated with subfreezing temperatures.  (c) PJM’s capacity resource forced outage rate was worse during Winter Storm Elliott than during the 2014 Polar Vortex (24% vs. 22%). (d) ConEdison’s city gate pressures declined significantly and rapidly the morning of Christmas Eve, leading ConEdison to declare a Gas System Emergency and narrowly avoid a gas system collapse in New York City.  FERC and NERC staff recommended additional work to improve the reliability of generator, grid, and natural gas infrastructure operations during cold weather and improvements to coordination between the gas and electric industries.  One of the most noteworthy recommendations was a call for Congress and/or state legislatures to enact legislation to establish reliability rules for natural gas infrastructure.  Staff will release a final report in the coming months.

Northeast Energy Summary

• On September 19, at the New England Power Pool Reliability Committee (RC) meeting, ISO-NE presented its fourth set of modelling results in its effort to better account for extreme weather and changes in supply and demand.  ISO-NE, with the help of the Electric Power Research Institute (EPRI), has developed a model to forecast potential future energy and reserve deficits under extreme winter and summer weather conditions.  ISO-NE presented results based on potential extreme weather scenarios in summer 2032 (the extreme weather generally characterized by high temperatures and low wind speeds).  Among its key results, the modelling shows no unserved energy and only a deficit of reserves for a 30-minute period under one specific extreme scenario.  ISO-NE will present the results of several stakeholder-requested sensitivity analyses of its base modelling results (for summer and winter 2027 and 2032) at the November RC meeting.

ERCOT Energy Summary

• Fall is fully engaged as cooling demand will be confined to the DSW this week with highs from the mid-90s to the lower 100s. The rest of the West will be mild with highs across California ranging from the low-70s to about 85o. Even as we look to the 11 – 15 day forecast the temperature outlook remains mild. Santa Ana driven heat events are not on the radar as the sea temperatures right off the coast bias the outlook towards seasonal. There’s an unsettled week ahead for the PNW as the region is going to see many opportunities for heavy rain. The precipitation is a healthy start to the Water Year which runs from October to September and follows a period which counts as the region’s worst dry spell since 2005.
• That weather outlook you just read translates to California degree day counts that are likely to be near zero for the next couple of weeks. Demand this past weekend for PG&E and SoCalGas combined dropped to just 3.6 Bcf which should be a fairly good indicator of how the next couple of weekends will shake out; weekday demand should stay in the 3.7 – 3.9 Bcf/day range. This provides an opportunity to inject gas for the upcoming heating season, but SoCalGas will be hobbled in that dimension starting Wednesday as Aliso Canyon goes out of service for maintenance which is expected to run through October 13th. Once Aliso goes offline, the high Operational Flow Orders (OFOs) will begin to fly as SoCalGas’s ability to inject gas drops to basically zero in the absence of an OFO declaration. As of Monday’s reports, SoCalGas has 7 Bcf of space to fill at its Goleta and Honor Rancho caverns. To access the 0.2 Bcf/day of injection capability at these two facilities they need to declare a high OFO. While this provides them in load zone balancing capability, they have to manage inflows over the next two low demand weeks and keep the fill line below tank tops in order to maintain a reserve for system reliability. This will push balancing activity back to the border points similar to this past weekend as delivered gas for the three-day package cleared at $2.06 per MMBtu. PG&E is in a similar situation as most of their caverns are full, only Lodi and Wild Goose are showing space available at 0.5 and 3 Bcf, respectively. Overall, they’re showing 157 Bcf in the tank ready for heating season, about 26 Bcf more than this time last year. Day Ahead power settles are clearing in the $30s and $40s with SP15 sometimes falling into the $20s as both utility-scale and behind the meter solar swamps the system.
• The State Water Resources Control Board recently approved the Governor’s plan to keep generating stations at Ormond Beach, Long Beach and Huntington Beach online through 2026, rather than closing them at the end of the year as planned. This is the third extension of service at the gas-fired Once-Through-Cooling units following plans to shutter them, first in 2020 and then again by December 31^st of this yr. The agency in charge of the reserve program, CDWR, contracted with the plant operators GenOn and AES to keep the plants online at a cost of up to $1.2 billion. The facilities include the 1,137 Alamitos Energy Center in Long Beach, the 226 MW Huntington Beach station, and the 1,491 MW Ormond Beach plant. These facilities typically operate 5% - 10% of the time, mostly during the summer months but are crucial for grid reliability in the LA Basin. Based on CDWR’s contract, the stations will receive fixed monthly capacity payments ranging from $8.80/kW-month to $10.95/kW-month. This means Alamitos can receive up to $529M, Huntington Beach up to $106M, and Ormond Beach up to $558M.

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