US POWER TRACKER: Higher CAISO load pushed up spot prices, forwards on the rise

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Western wholesale power prices increased year over year in October on higher peakload despite mild weather, while power forwards have rebounded heading into the winter season.

Peakload averaged 29.5 GW in October, an increase of 5.5% compared to a year ago, according to CAISO data. CAISO peakload jumped mid-month, averaging 31.447 GW Oct. 17-21, 11.3% higher than the rest of the month, as population-weighted average temperatures were 6.5% lower than normal, according to CustomWeather data.

"Cooling demand increased at mid-month in the Southwest," said Morris Greenberg, senior manager for North American power analytics with S&P Global Commodity Insights.

At the same time, thermal generation climbed mid-month, averaging nearly 53% of the total fuel mix for Oct. 17-21, nearly 10 percentage points higher than the rest of the month, as wind generation was cut in half, averaging 3.5% of the total fuel mix for Oct. 17-21, according to CAISO data.

Spot market

The mid-month surge drove up spot prices.

SP15 on-peak day-ahead locational marginal prices averaged $76.14/MWh for Nov. 17-21, 26% higher than what prices averaged the rest of the month and reached a month high of $89.22/MWh for Nov. 19, according to CAISO data.

Overall, SP15 on-peak day-ahead LMPs averaged $62.89/MWh in October, 11.6% higher year on year even as prices came down month on month following seasonal changes, according to CAISO data.

Natural gas spot prices remain higher than year-ago levels, but the premium has narrowed.

SoCal city-gates averaged $6.198/MMBtu for October, 1% higher year over year, while PG&E city-gates averaged $7.332/MMBtu in October, 5% higher than a year ago, according to S&P Global Commodity Insights pricing data.

The biggest price movement was seen in the Desert Southwest, where Palo Verde on-peak day-ahead rose 20.5% from a year ago to average $58.41/MWh for October.

Fuel mix

Total generation was up 5.5% from a year ago, averaging 25.6 GW in October, according to CAISO data.

Natural gas led the fuel stack, averaging 44.5% of the total fuel mix, up 4.5 points year on year, according to CAISO data.

"Thermal generation declined in absolute terms from September to October, but the share increased due to lower demand along with drops in imports and nuclear generation," Greenberg said.

The only other fuel source to see an increase year over year was solar, which averaged 16% of the October mix, up 1.2 points,

Meanwhile, imports slipped 3.5 points from a year ago to average 17% of the mix for October, while wind averaged 6.5% of the mix in October, down 1.4 points from a year ago, according to CAISO data.

Forward curve

Power forwards are trending higher down the curve, following gas forwards.

Mid-C on-peak November rolled off the curve at $70/MWh, 10% higher than where the 2021 package ended, according to S&P Global data.

On-peak December is currently in the low $110s/MWh, 55% higher than its 2021 counterpart a year ago, while on-peak January is in the mid-$120s/MWh, 72% above the 2022 package last year.

"Runoff forecasts are below normal but it's very early and above-normal precipitation is in the near-term forecast," Greenberg said.

Sumas natural gas prices averaged $4.80/MMBtu last January and Jan 2023 is currently trading in the $9/MMBtu range, "so that probably accounts for higher forward power prices," Greenberg said.

The 6-10-day outlook indicates a greater probability for above-normal temperatures in the Northwest and California, as well as above-normal precipitation in the Northwest, according to the US National Weather Service's Climate Prediction Center. The three-month outlook indicates greater chances for above-normal temperatures in California and the Southwest, but equal chances for above- and below-temperatures in the Northwest, while above-normal precipitation is expected in the Northwest region, with below-normal changes in the Southwest and Southern California.