Brutal cold snap boosts US power, natural gas demand, prices

Power and natural gas demand and prices surged across a wide swath of the United States on Jan. 3 in reaction to forecasts of winter storms plus lake-effect snow across much of the northern half of the nation, and sub-freezing weather reaching as far south as central Texas.

The National Weather Service issued winter weather advisories from the Pacific Northwest to the central Great Plains, plus much of the Great Lakes and Mid-Atlantic region. Much of Illinois, Iowa, Kansas, Missouri and Nebraska faced winter storm warnings, and winter storm watches were issued for the Ohio River Valley region, and lake effect snows were forecast for the Northeast US. Texas faces sub-freezing low temperatures across much of the state Jan. 6-10.

Northeast markets

Northeast wholesale power prices spiked into triple-digit territory in reaction to the expected cold snap driving up demand for power and gas despite a lack of reliability concerns.

Mass Hub on-peak day-ahead climbed nearly $50 day on day to trade in the upper $120s/MWh for Jan. 6 delivery on the Intercontinental Exchange, while on-peak weekend packages traded around $105/MWh.

"We are not anticipating any reliability issues tied to the upcoming cold weather," ISO New England spokesperson Mary Colapietro said Jan. 3. "Though temperatures in the coming week are expected to be below average, we're not anticipating extreme cold."

Consumer demand is expected to remain below the forecast winter seasonal peak, she added. In its winter readiness report, ISO New England forecast the winter peak to reach 20.308 MW under normal weather conditions and 21.089 GW under below-average temperatures, with more than 30 GW of resources available to serve that load.

Peakload is forecast to jump 10.3% to 18.2 GW Jan. 6 compared to 16.5 GW Jan. 3 and reach as high as 18.6 GW Jan. 9, according to ISO New England data. The winter peakload record of more than 22.8 GW was set Jan. 15, 2004. Winter demand peaked at less than 18.3 GW last year.

Northeast natural gas prices strengthened for weekend delivery amid forecasts for incremental demand gains on top of a roughly 10 Bcf/d increase seen in recent days. Gas prices at major demand centers in New England and New York rose by upwards of $3.75/MMBtu for Jan. 4-6 flow, as prices at both Algonquin city-gates and Tennessee, zone 6 topped $13/MMBtu in Jan. 3 trading.

Regional demand in the Northeast closed out 2024 around 24 Bcf/d on Dec. 31, S&P Global Commodity Insights data shows, and it climbed to 34.8 Bcf/d Jan. 3. Colder weather may cause regional demand to top out as high as 40.5 Bcf/d by Jan. 9, based on current forecasts.

Mid-Atlantic markets

In the New York ISO, Zone G on-peak day-ahead was bid at $105/MWh and offered at $160/MWh for Jan. 6 delivery on ICE, while Zone A was bid at $65/MWh and offered at $110/MWh. Zone A on-peak next week for Jan. 13-17 was offered at $135/MWh on ICE.

In comparison, Zone G on-peak day-ahead locational marginal prices have averaged in the low $70s/MWh over the last 30 days, while Zone A has averaged in the mid-$50s/MWh, according to NYISO data.

NYISO forecast peakload to climb 8.2% day on day to 21.6 GW Jan. 6 and then continue to climb to 22.1 GW by Jan. 9. NYISO set its winter peakload record of 25.7 GW Jan. 7, 2014. Winter 2024 peakload approached 22.8 GW Jan. 17.

PJM expects its peakload to reach a five-month high of nearly 129.5 GW by Jan. 9, after jumping about 7% day on day to 120 GW for Jan. 6. PJM set its winter peakload record of 143.295 GW Feb. 20, 2015.

However, prices moved less than neighboring markets. PJM West Hub on-peak day-ahead traded in the mid-$50s/MWh for Jan. 6 delivery on ICE, spiking over $16 day on day.

Midcontinent markets

Meanwhile, Southwest Power Pool and Midcontinent Independent System Operator both issued advisories in anticipation of surging loads.

SPP's resource advisory is effective from 4 am CT Jan. 6 to noon Jan. 8 and is on top of a weather advisory to last from 12 am Jan. 5 to noon Jan. 8. MISO issued a cold weather alert for its service territory and declared conservative operations for its South region, with both effective from 12 am ET Jan. 6 to 11:59 pm Jan. 9.

"MISO and our member utilities are monitoring weather conditions as arctic air is forecast for our region," spokesperson Brandon Morris said.

In response to the advisories, SPP South Hub on-peak day-ahead power for Jan. 6 delivery priced near $72.50/MWh, up about $40.50 from the previous day settlement while MISO's corresponding contract at the Indiana Hub traded at $53.25/MWh, up $18.25 from the previous day.

The SPP South Hub day-ahead balance-of-the-week contract for Jan. 7-10 delivery priced near $112.50/MWh, up from about $78.75/MWh. However, the MISO Indiana Hub real-time balance-of-the-week contract for Jan. 7-10 delivery priced near $69/MWh, down from the previous settlement at $82.50/MWh.

SPP forecast peakload to average 42.2 GW for Jan. 6-8, with a high of 42.5 GW Jan. 8. Population-weighted temperatures for SPP's 14-state footprint were forecast to average 14 degrees Fahrenheit Jan. 6-8, CustomWeather data shows, compared with normal averages of about 35.8 F.

SPP highlighted the potential for a wind output reduction due to icing. SPP forecast wind output during the resource advisory period to peak at 20.2 GW Jan. 6, but it could register as low as 3.4 GW that day. Peak wind output is forecast to average 14.6 GW Jan. 6-8.

MISO's peakload is forecast at 81 GW Jan. 5 before rising to 89.5 GW Jan. 6 and 92.8 GW Jan. 7. Population-weighted temperatures for MISO's 15-state footprint were forecast to average 16.8 F Jan. 6-9, CustomWeather data shows. Population-weighted temperatures across MISO for the same period in January have averaged about 28 F.

Texas markets

Texas faces its first big winter weather test Jan. 6, as CustomWeather forecast sub-freezing temperatures as far south as San Antonio through Jan. 11, which prompted the Electric Reliability Council of Texas to issue an Operating Condition Notice, the first of four levels of communication in anticipation of a possible emergency condition.

ERCOT forecast loads to peak at more than 73.1 GW on Jan. 8, compared with its Monthly Outlook for Resource Adequacy expectation of a January peak of 71.5 GW.

During Jan. 3 trading on the Intercontinental Exchange, ERCOT North Hub day-ahead and real-time on-peak contracts both jumped about $29.75 from their respective previous settlements to both price about $54.25/MWh for Jan. 6 delivery.

The North Hub balance-of-the-week peak Jan. 7-10 contract fell around $2.50 but remained trading above next-day contracts at about $75.50/MWh.

Houston Ship Channel gas was down by more than 7 cents on the day at $2.98/MMBtu for delivery Jan. 4-6, but this is above the 2020-24 average of around $2.62/MMBtu for those dates.