Excessive heat across Western US helps keep power, natural gas prices elevated

Excessive heat warnings are in effect across large portions of the Western US in the early part of this week, helping to keep wholesale electricity and natural gas prices elevated throughout the region.

The US National Weather Service said in its short-range forecast Aug. 5 that the excessive heat warnings cover the Desert Southwest region and portions of California's central/southeastern California. A few major population areas are poised to see daily high temperatures in the 110s.

Among notable areas in the West poised to see high temperatures above historical norms for this week are Las Vegas, Phoenix, Salt Lake City and Sacramento. Las Vegas' temperature was 112 degrees Fahrenheit Aug. 4 and forecast to average 108.9 degrees Aug. 5-11, about 5% hotter than the city's historical normal high temperature for the seven-day period, according to CustomWeather data.

According to CustomWeather, Phoenix saw a high temperature of 116 F Aug. 4 and was forecast to average 110 F in high temperatures Aug. 5-11, about 4% higher than historical norms for this period. Salt Lake City is predicted to average 100.3 degrees in high temperatures in the same span, around 7% above historical norms; Sacramento is anticipated to average 100.1 degrees in high temperatures, also around 7% hotter than historical norms.

While still above historical norms, Sacramento's forecast average high temperature for this week is still lower than forecasts seen July 10-14 when large portions of the West were under a prolonged heat wave.

"Thankfully, the Sacramento region is not experiencing a heat wave this week, if forecasts hold up," Gamaliel Ortiz, a spokesperson for Sacramento Municipal Utility District, said in an Aug. 5 email. "Power reliability is a core value, and SMUD has enough power resources to meet expected demand, barring a grid or other emergency or unexpected significant power shortfall."

That sentiment was echoed by Rocky Mountain Power, which services electricity customers in the Salt Lake City region.

"Rocky Mountain Power has been managing the hot weather so far with no major problems," spokesperson David Eskelsen said in an Aug. 5 email. "We had a longer run of hotter temperatures earlier in July, and it looks like the daily highs and nighttime lows will be moderating after Thursday."

Power, gas prices

Amid the high heat, day-ahead power prices in the West market tumbled but remained at elevated levels.

Palo Verde day-ahead on-peak for Aug. 6 delivery was slightly lower during Aug. 5 trading on the Intercontinental Exchange, losing almost $5.25 to trade near $122/MWh while the corresponding contract at Mona, Mead and NP15 also tumbled by close to $21.75, $7.75 and $7.25, respectively.

On Aug. 5, spot gas prices across the West were up, but remained well below highs typically seen during the peak summer cooling season.

At the SoCalGas city-gate, the cash market Aug. 5 was assessed at just $2.90/MMBtu. From June 1 to date, prices there have averaged only $2.13, which compares with an average $4.73 over the same 10-week period last year. During summer 2023, southern California gas prices routinely traded into the high single-digits and on several occasions at upwards of $10 — levels so far unseen this season.

At other historically volatile hubs across the Western US – like the SoCal Border hub trading Aug. 5 at around $2.78/MMBtu, PG&E city-gate pricing close to $3.26 and Kern River, delivered at $2.84 – gas prices were mostly higher on the day but still well below levels seen during summer 2023, data from Intercontinental Exchange and S&P Global Commodity Insights showed.

Hot weather in MISO

Elsewhere in the US, a hot weather alert was in effect 12 pm ET Aug. 5 to 10 pm Aug. 8 for Midcontinent Independent System Operator's South Region, which encompasses Louisiana and parts of Texas, Arkansas and Mississippi, because of high temperatures expected to exceed 100 F.

MISO peakload was forecast at 112.7 GW Aug. 5, about a 2% increase over Aug. 4 peakload. The peakload for Aug. 6 was forecast at 107.6 GW.

At MISO's Indiana Hub, day-ahead on-peak traded near $41.25/MWh, down about $5.25 from where it settled the previous day.