US POWER TRACKER: Western prices falling on above-normal temperature forecast

Western US power forwards are falling on lower gas forwards and the likelihood of warmer-than-normal weather in the coming months due to El Nino conditions, as spot prices averaged 27% lower year on year in November from lower gas prices and increased hydro generation.

Power forwards are following lower gas forwards, as the three-month outlook shows a greater probability for above-normal temperatures across the region, according to the US National Weather Service's Climate Prediction Center.

SP15 on-peak December rolled off the curve at $69/MWh, 55.5% lower than where the 2022 package ended, according to data from Platts, which is a part of S&P Global Commodity Insights data. On-peak January is currently in the mid-$50s/MWh, 76% below where the 2023 package was a year ago, while the February package is in the upper $40s/MWh, 62% lower.

"The 2022-2023 winter was cooler than normal out West while 2023-2024 is expected to be warmer than normal, largely as a result of El Nino lingering into the winter months," said Shayne Willette, S&P Global Commodity Insights senior research analyst. "With that said, I think the steep drop off in forwards relative to last year is the much looser gas market."

Helping pull down power forwards, SoCal city-gates December rolled off the curve at $5.291/MMBtu, 60% below where the 2022 package ended, according to S&P Global data. The January contract is currently around $3.976/MMBtu, 80% lower than its 2023 counterpart a year ago, while the February contract is around $3.743/MMBtu. 74% lower.

"December actual and forecast mild weather has led to a collapse in gas futures," said Morris Greenberg, senior manager with the low-carbon electricity team at S&P Global.

The California Public Utilities Commission authorized the increase of the Aliso Canyon gas storage facility's capacity from 41 Bcf to 68 Bcf to help avoid price spikes and bolster reliability for the winter.

Spot market

Spot prices across the Western US were much lower compared to a year ago, even as prices spiked at the end of November as temperatures plunged. Peakload climbed to 9.533 GW Nov. 28, the highest level since late February 2023, according to Bonneville Power Administration data.

That drop in temperatures caused Mid-C on-peak to climb to $128.67/MWh Nov. 30, according to Platts data. For November as a whole, Mid-C spot prices averaged $75.33/MWh, down 27.8% month on month and down 19.8% year on year. Mid-C hourly prices averaged $69.52/MWh in November, 29% lower than a year ago, but nearly $6 higher than day-ahead prices.

"For anything year-over-year in the Northwest, weather of course plays a role, but I would largely attribute the day-ahead price declines to gas prices," Willette said, adding Stanfield and Malin were down about 75% in November.

Spot gas at Sumas averaged $4.202/MMBtu for November, 55% above year-ago prices, according to Platts data.

Northwest hydro

In the Northwest, hydro-powered generation jumped 10 percentage points month on month to average 72.5% of the total fuel mix in November, according to BPA. However, hydro was down 1 point from a year ago.

"With much of the Northwest experiencing drought through the late summer and early fall, hydro in the NWPP bounced back in November, averaging 11.5 GW of generation for the month," according to the S&P Global's North American Electricity Short-term Forecast. "With that said, reservoir levels still remain low and hydro generation is down 12% year over year."

At the same time, nuclear generation eased 3.6 points from last month to average 12.2% of the mix in November as thermal generation fell 5.5 points to average 10.4% of the mix, according to BPA data. Load increased 17.2% month on month to average 164.747 GWh/day for November, according to BPA data.

Peakload was up nearly 7% year on year to average 6.723 GW in November, up 5% month on month, according to BPA data.

California fuel mix

In California, hydro is still performing unseasonably well compared to November 2020, 2021, and 2022, at 2.1 GW, according to the S&P Global's North American Electricity Short-term Forecast.

Solar generation rose 3.8 points year on year to average 17.5% of the total mix for November, as hydro increased 3.3 points to average 7.8%, according to California Independent System Operator data. Thermal remained the lead fuel source at 45.6% of the mix, little changed from a year ago.

Peakload dropped over 6% from October on cooler weather, averaging 29.684 GW in November, according to CAISO data. However, population-weighted temperatures were up 7% year on year, leading to 45.3% less heating-degree days in November compared to a year ago, according to CustomWeather.