California’s electric Grid is showing improvements compared to last August, however, Elliot Mainzer, president, and chief executive officer of the California Independent System Operator (ISO) was cautious about his statements and added “It continues to get hotter every year. As a result, the grid will continue to remain vulnerable to high loads and decreased imports during a broader West-wide heatwave event like the one we saw last year. If imports dry up and we’re limited to capacity that’s been secured under resource adequacy contracts, we're facing the possibility of the scarcity of energy supply this summer.” California Independent System Operator (ISO) is one of the largest power grids in the world and manages about 80 percent of the California electric grid as well as parts of Nevada. In order to have a reliable grid, the California Public Utilities Commission (CPUC) President Marybel Batjer said additional steps such as directing utilities to procure more resources such as adding 2.5 percent to the previously required 15 percent reserve capacity, adopting an emergency load reduction program, ordering investor-owned utilities to modify critical peak pricing programs and expanding demand response programs. The California Energy Commission (CEC) has incorporated improving its energy demand forecasting extended from a 10-year horizon to 15 years, evaluating rooftop solar to determine performance and reliability, and investing $74 million to support new technologies. California with its challenges of the grid is still planning to achieve clean energy goals.
Lubbock Power & Light (LP&L) successfully connected 70% of its system, which is approximately 83,000 customers, to the Electric Reliability Council of Texas (ERCOT) on May 30. This interconnection is the first in Lubbock’s history and the first in the state in 25 years. The interconnection project has been in the works since March 2018 and LP&L customers can expect to see greater savings with the removal of capacity charges that are not required in ERCOT compared to other ISOs. The second phase is awaiting approval to connect the remaining 30% of the LP&L system which is about 24,000 customers. In addition to customer savings, LP&L joining ERCOT would eliminate new power plants which are estimated to cost $350 million to $700 million. Connecting to ERCOT is the first step in opening the door to retail electric competition in Lubbock.
Vistra Corp. owns 36 natural-gas power plants, one of America’s largest fleets and doesn’t plan to buy or build anymore. Instead, Vistra intends to invest more than $1 billion in solar farms and battery storage units in Texas and California. Vistra Chief Executive Curt Morgan stated, “I’m hellbent on not becoming the next Blockbuster Video. I’m not going to sit back and watch this legacy business dwindle and not participate.” A decade ago, natural gas displaced coal as America’s top electric power source, as fracking unlocked cheap quantities of the fuel. Natural-gas-fired electricity represented 38% of U.S. generation in 2019, according to the U.S. Energy Information Administration. Battery storage remains less than 1% of America’s electricity market and so far draws power principally from solar generators.
General Market Update
- The July 2021 NYMEX Henry Hub traded to $3.129/MMBtu, up to $0.05 (+1.8%) from the previous Wednesday. The price of the 12-month strip averaging July 2021 through June 2022 futures contract was up $0.06 (+1.9%) to $3.108/MMBtu.
- Boston’s Algonquin Citygate price went up to $0.07 (+3.0%) to $2.62/MMBtu last Wednesday. Transco Zone 6 NYC price increased $0.12 (+5.5%) to $2.30/MMBtu.
- Pennsylvania’s Eastern Gas South (formerly known as Dominion South) fell $0.01 (-0.1%) to $2.00/MMBtu. Tennessee Zone 4 Marcellus spot price increased $0.45 (+30.2%) to $1.94/MMBtu.
- SoCal Citygate price decreased $0.98 (-21.9%) to $3.50/MMBtu last Wednesday. The price at Northern California PG&E Citygate fell from $0.18 (-4.4%) to $3.87/MMBtu week over week.
The upcoming Price to Compare for United Illuminating in Connecticut, Residential rate class (UI - R) is $0.08667/kWh, in effect from July 1, 2021, to July 31, 2021.
Headroom in the UI – R territory is now available in the shorter period for a contract with a 3-month term. Headroom of $0.00077/kWh is likely for the 3 month period; respectively.
The current Price to Compare data for Atlantic City Electric Company in New Jersey, Monthly General Service Primary rate class (AECO - MGSP) is $0.09010/kWh, in effect from July 1, 2021, to July 31, 2021.
Headroom is available in the AECO – MGSP market for the shorter period for a contract with 3 and 6-month terms. Headroom of $0.00939/kWh is likely for the 3 month period and headroom of $0.00480/kWh is likely for the 6 month period; respectively.
- For the week ending June 4th, 2021, the EIA reported net injections into the storage of 98 Bcf, which is more than last year’s net injection of 95 Bcf this week last year and more than the 5-year (2016-2020) average net injections of 92 Bcf.
- Working natural gas in storage totaled 2,411 Bcf, which is 383 Bcf (-13.7%) lower than last year’s working gas totals of 2,794 Bcf at the same time and 55 Bcf (-2.2%) lower than the 5-year average of 2,466 Bcf. The total working gas is within the five-year historical range.
- The average total supply of natural gas rose 1.2% week/week. Dry natural gas production was higher by 1.2%, while net imports with Canada increased by 19.8% compared with the previous week.
- Total US consumption of natural gas rose by 6.4% since last week. Natural gas consumption for power generation increased 27.0%, industrial sector consumption decreased 2.8%, residential-commercial consumption decreased 25.8%, and exports to Mexico decreased 1.1% compared to last week.
- US LNG exports fell week over week, with 17 vessels departing US ports for a combined 61 Bcf.
- A warm weather pattern for most of the Western United States and Florida is forecast through the latter portion of June 2021 in the 8-14 window starting June 18th. The Western United States consisting of the Pacific Coast States, Rocky Mountain States, 4 Corners States, and the Midwestern States along with Florida are forecast for above-normal temperatures. Texas, the Middle Atlantic States, and the New England States are forecast for a below-normal temperature pattern. The Southern States, besides Florida, are forecast for a normal temperature outlook. The Rocky Mountain States have the highest probability for much above normal temperatures, while South Texas has the highest probability of below normal temperatures.
- In the 8-14 day window from June 18th through June 24th, The Southern States, Middle Atlantic States, and the New England States are predicted to see normal precipitation. The Northern Pacific Coast States, Rocky Mountain States, Midwestern States, and North Texas are forecast for below-normal precipitation. Arizona, Louisiana, and South Texas are forecast for above-normal precipitation.
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