US POWER TRACKER: Southeast October power likely weaker with gas

On the heels of the hottest summer at least since 2017 for some states and despite forecasts for continued extraordinarily warm weather, Southeast US wholesale power prices are likely to be weaker in October, largely because of weaker natural gas prices, judging by movements in forward markets.

In Florida, the population-weighted average temperature in August was 85.5 degrees F, 2.2% hotter than 2022's 83.7 F and 2.3% higher than the 2017-2022 average of 83.6 F, according to CustomWeather, which provides the statistic only as far back as 2017. This was Florida's hottest August since 2017, judging by this statistic.

The situation was similar in Georgia, where the population-weighted average temperature in August was 81.8 F, 3.9% hotter than 2022's 78.7 F and 2.9% higher than the 2017-2022 average of 79.5 F. In 2023, this state also had its hottest August since 2023.

In North Carolina, the population-weighted average in August was 80 F, 1.5% hotter than 2022's 78.8 F and 1.4% hotter than the 2017-2022 average of 78.9 F. But this August's average of 79.96 F was slightly below the 2021 average of 80.01 F.

August's extraordinary heat did not result in universally higher loads than in October 2022, according to US Energy Information Administration data collected by S&P Global Commodity Insights. In the North American Electric Reliability Corporation's SERC region, formerly known as the Southeast Electric Reliability Council, load levels averaged 84.7 GW in August, up 1.2% from July's 83.7 GW but down 4.3% from August 2022's 88.4 GW.

In NERC's Florida Reliability Coordinating Council footprint, load levels averaged 38.3 GW in August. Up 3.5% from July's 37 GW and up 6.4% from august 2022's 36 GW.

Looking ahead, CustomWeather forecasts temperatures in the Southeast US to range from 2 to 4 degrees higher than usual in October, with the larger temperature deviations in the Appalachian region.

Forward markets

Possibly driven by current anomalous weather conditions, S&P Global Platts-assessed October on-peak forwards in the Southeast generally traded higher in August, averaging around $39.50/MWh for the Into Southern Package and about $38.90/MWh for Vacar, up 3.2% and 4.6%, respectively from July's averages.

Florida's October on-peak power was assessed around $36.35/MWh in August, down 1.1% from July's average.

However, all three had plunged, compared with how October 2022 on-peak power traded in August 2022, which were about $100.50/MWh for Into Southern, almost $131/MWh for Vacar and about $95.25/MWh for Florida power.

They are also all three substantially lower than the day-ahead on-peak assessments in October 2023, which averaged about $67.10/MWh for Into Southern, $68.50/MWh for Vacar and about $70.30/MWh for Florida power.

Natural gas prices

At the Transco Zone 4 natural gas price point, Platts assessed October gas at $2.825/MMBtu in August, up 1.3% from July's $2.79/MMBtu but down 69.2% from the $9.184/MMBtu that October 2022 gas averaged in August 2022.

At the Florida Gas Zone 3 pipeline, Platts assessed October gas at $3.101/MMBtu, up 1% from July's $3.069/MMBtu but down 67% from the $9.407/MMBtu that October 2022 gas averaged in August 2022.

In October 2022, Platts-assessed Transco Zone 4 spot gas averaged $5.547/MMBtu and Florida Gas Zone 3 at $5.625/MMBtu.

Another factor that may tend to weaken power prices could be tropical weather, for which the National Hurricane Center has forecast increased activity through the Nov. 30 end of the 2023 hurricane season.

By knocking down power lines in utilities stretching from Florida's Gulf Coast to the Carolinas, Hurricane Idalia, which landed as a major hurricane Aug. 30, coincided with a 27.5% drop in Florida bilateral power assessments, compared with the previous 10-day average, and a 35.9% decrease in Into Southern bilateral assessments.