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Tuesday Jul 30, 2019   
We have noted in previous articles how maintenance outages can wreak havoc on a gas system and as a result cause pricing issues. Over the past three years we have been covering the saga at SoCal Gas as the point became the most volatile and opportunistic location for trading. But that now has seemed to shift. SoCal has solved many of their woes by welcoming some operational mandates from the California Public Utilities Commission. Outside of California the most exciting place to trade may be over the United States border to the North. Nova Gas has been undergoing many seasons of maintenance and system upgrades as they expand capacity on their system. This is being done in an effort to keep their energy production complex competitive with the booming volumes coming out of Permian, Bakken ... » read more
Monday Jul 29, 2019   
Over the last couple of years, the natural gas landscape has developed into a physical basis market where each region has its own set of market fundamentals tied to the supply/demand picture.  Take for example, up in the Pacific Northwest a pipeline explosion (Enbridge) last October (2018) put the region on the map as the main artery of supply was severed and without knowing how long it was going to take to fix the problem and understand what caused the 36 inch pipe to rupture in the first place, the question quickly became how will the region get its natural gas for both the winter Rescom demand and the ever popular power burns.  Today's news letter take a top level view of the regional fundamentals in the natural gas space and the tools EnergyGPS has in place to monitor the ... » read more
Friday Jul 26, 2019   
Although PJM may have coasted through last week’s heat wave—it experienced an all-time weekend peak but issued no reliability warnings or actions—FERC turned up the regulatory burner under PJM in its capacity market docket.  Yesterday, FERC ordered PJM to halt its Base Residual Auction (BRA), currently scheduled to run in mid-August 2019 (EL16-49-000/EL18-178-000).  FERC did not say what's next. Presumably it will get on with issuing an order on PJM's proposal to modify its capacity market, with the 2022-23 BRA held later this year or, more likely, in 1Q2020. PJM normally conducts its 3-year-forward capacity auctions in May but received approval last year to move the date of the 2022-23 BRA out to August 2019.  That schedule was designed to allow enough ... » read more
Thursday Jul 25, 2019   
The recent bout of hot weather that hit the Northeast late last week caused demand to rocket upwards to its high point so far this summer causing oil to enter the market in ISONE. Even the weekend couldn’t give the region a break with temperatures continuing their climb on Saturday. Although the hottest weather took a little longer to make its way into ISONE, the market was no exception to the enveloping heat. With soaring demand, generation was no longer able to remain in the gas stack and was forced to burn oil in order to meet load. While the market is no stranger to oil burns, the fundamentals behind the recent spurt are different than the winter when oil burns are most prevalent. Taking a look at Figure 1, we can see that the highest demand hit the region over the weekend ... » read more
Wednesday Jul 24, 2019   
Yesterday we sent out a market flash via our West Natural Gas product offering detailing the latest SoCal Gas Critical Notice around withdrawals at Aliso Canyon.  Yes, you heard it correctly withdrawing gas at the facility that has had so much scrutiny over the years during the summer months.  Over the past two winters, the regulators have had a close eye on the facility and made sure the circumstances were such that the system operators had not choice but to take gas out of the ground at Aliso Canyon.  The daily activity was recorded and published after the fact so that it was somewhat transparent to the public what was happening at the facility post-valve leak. The summer months have been treated a little differently as the main objective has been to get the facility full ... » read more
Tuesday Jul 23, 2019   
In the aftermath of the disasters as Aliso Canyon, San Bruno and the wildfires of last summer the State of California is putting into place a number of steps to make both the power grid and gas infrastructure safer. Both PG&E and SoCal Gas will be hit with a number of new mandates that have to be implemented. The cost of these new programs will have to be imbedded into any new rate designs adopted by the Public utilities Commission. Last November we got a glimpse of what these costs may do to the revenue requirement for PG&E. They posted a proposal and there was not one stone left unturned. One of the biggest impacts was the cost of transportation services on the Redwood and Baja Paths into Northern California. Based on some preliminary estimates they would imply a 100+% on ... » read more
Monday Jul 22, 2019   
The Lone Star state has seen its wind generation oscillating over the past two weeks as it goes from averaging double digits to sitting in the the 2-4 GWa range over the same time period.  Such swings keep the system operators on their toes as they have to make adjustments to the supply stack to get everything to balance within any given hour.  The saving grace to the low wind days is the fact that the Houston Shipchannel spot prices are moderate at best so the units that need to rapidly turn on for any type of ramp have less expensive gas available to them than otherwise seen in previous years.  The graph below breaks down the ERCOT daily movement when it comes to the price action in the North zone and how the wind/load deviations impact the final outcome. Figure 1 | ERCOT ... » read more
Friday Jul 19, 2019   
In our consulting practice, we spend a lot of time building models, crunching numbers, and evaluating risk for electricity generating assets. We work for project developers, project operators, investors, and C&I buyers. While the question of “value” is usually the initial focus, the conversation often shifts to risk. For C&I buyers, the treasury and finance folks want to know how an asset will perform long term; they also want to know the potential impact on quarterly cash flow and earnings. With some clients, concern about quarterly cash variability is as important as the overall value. When thinking about cash flow variability, we typically think about the following categories of risk: Volume Risk – Production volumes can vary from expectations. While this risk ... » read more
Thursday Jul 18, 2019   
The Northeast has been fortunate enough to avoid major heat spells so far this summer. While there have been a few hot flashes, storms were quick to drench the region cooling temperatures back down. However, the region is in for an awakening as temperatures are expected to climb well above normal for the end of this week. Daytime highs for the entire Northeast are forecast to break into the 90s while a few areas should hit triple digits. With the sweat inducing hot temperatures, we can only expect that people will crank up their AC’s in order to beat the heat. The additional cooling should take peak load up to its highest point so far this year. Figure 1 | WSI Maximum Temperatures in the Northeast In PJM, peak demand is expected to reach up to 153 GWs on Friday as the hottest ... » read more
Wednesday Jul 17, 2019   
When Westcoast Pipeline suffered a rupture last fall the Pacific Northwest scrambled to adjust to the loss of flows into the Sumas delivery hub from Canada. The pipe which normally flowed over 1 BCF per day into the states to feed Seattle and Portland homes with heat and electricity had gone to zero. It was an all hands on deck event to make up for the single biggest source of molecules into the area just as heating load in the region was on the climb. Northwest Pipeline immediately filled to capacity drawing all it could from the Rockies. Jackson Prairie storage inventory was taken down to near zero through the winter months. And natural gas generation in the I-5 corridor was curtailed in lieu of ResCom demand.   Figure 1 | Sumas Receipts From Canada  It truly was a ... » read more
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