Jul 14, 2021 3:03:08 PM

PJM Board of Managers approved to prohibit and mitigate the exercise of Buyer-Side Market Power (BSMP) through the minimum offer price rule (MOPR) in the wholesale power market. According to Adam Keech, Vice President of market design and economics at PJM, the PJM proposal seeks to mitigate the MOPR in three critical ways: to narrow the scope of the MOPR back where it was originally intended which was aimed at mitigating buyer-side market power; to avoid harming state policies and power providers with self-supply business models, and to make sure the market design is robust and could work well into the future. Calpine, Exelon, Public Service Electric & Gas Company, LS Power, E-Cubed Policy Associates, Independent Market Monitor (IMM), and American Municipal Power (AMP) issued their own proposals to PJM stakeholders. PJM President and CEO Manu Asthana said “this proposal ensures that our capacity market accommodates state policy and self-supply business models, avoids customer costs of double-procurement, addresses attempted exercises of buyer-side market power and creates a sustainable market design by keeping clearing prices consistent with supply and demand fundamentals.” 

A heatwave has prompted excessive heat warnings from the Pacific Northwest to the Northeast, Western Canada, and the East Coast. The extreme conditions have sent future prices to soar early in the season. According to NatGasWeather “what helps make the coming pattern bullish is the likelihood of a hot pattern for the 11- to 15-day period (July 7-12) carrying over to the 16- to 20-day period (July 13-17).” Roadways and energy infrastructure were affected due to the heatwave, including power outages, transmission line voltage reductions, compressor issues, and pipelines. Aegis Hedging Solutions said several compressor stations in Western Canada were offline for periods of time because of the extreme heat. Generators for hydroelectric power have decreased capacity in producing power because of lower lake levels. Power outages in California and western states lead to higher gas prices.

NRG Energy Inc. said it will retire three coal-fired power plants—two in Illinois and one in Delaware—next year after disappointing results in the May 2021 capacity auction for the PJM Interconnection. The clearing price for most of PJM’s service territory dropped to $50/MW-day in the 2022-23 capacity auction, down from $140/MW-day for the unconstrained regional transmission organization region in the 2021-22 capacity auction. PJM said there was a reduction of 8,175 MW of coal generation from the previous auction when accounting for resources committed to fixed resource requirement plans. Christopher Moser, NRG’s executive vice president of operations said the three facilities would be retired in June 2022. 

shutterstock_678035671
 

General Market Update

  • .73/MMBtu. Tennessee Zone 4 Marcellus spot price increased $0.06 (+2.3%) to $2.65/MMBtu.

  • SoCal Citygate price decreased by $0.19 (-3.5%) to $5.26/MMBtu last Wednesday. The price at Northern California PG&E Citygate fell $0.34 (-6.7%) to $4.71/MMBtu week over week. The August 2021 NYMEX Henry Hub traded to $3.596/MMBtu, down $0.05 (-1.5%) from the previous Wednesday. The price of the 12-month strip averaging August 2021 through July 2022 futures contract was down $0.01 (-0.3%) to $3.259/MMBtu.

  • Boston’s Algonquin Citygate price went down $1.18 (-28.2%) to $3.01/MMBtu last Wednesday. Transco Zone 6 NYC price increased $0.07 (+2.2%) to $3.26/MMBtu. 

  • Pennsylvania’s Eastern Gas South (formerly known as Dominion South) fell $0.08 (-2.8%) to $2.

Utility Highlight

  • The upcoming Price to Compare for First Energy Potomac Edison in Maryland, Residential No Electric Heat rate class (RSNH) is $0.06572/kWh, in effect from August 1, 2021, to November 30, 2021.

  • Negative Headroom in the POTED – RSNH territory is now present in the shorter period for a contract with 3 and 6-month terms.  Headroom of negative $0.02599/kWh is likely for the 3 month period and headroom of negative $0.03095/kWh is likely for the 6 month period; respectively.


  • The current Price to Compare data for First Energy Potomac Edison in Maryland (POTED), General Service Commercial Small (GSCS) is $0.12789/kWh, in effect from August 1, 2021, to November 30, 2021.

  • Headroom is available in the POTED – GSCS market for the shorter period for contracts with 6 and 12-month terms.  Headroom of $0.03965/kWh is likely for the 6 month period and headroom of $0.04387/kWh is likely for the 12 month period; respectively.


Storage

  • For the week ending June 18th, 2021, the EIA reported net injections into the storage of 55 Bcf, which is less than last year’s net injection of 115 Bcf this week last year and less than the 5-year (2016-2020) average net injections of 83 Bcf.

  • Working natural gas in storage totaled 2,482 Bcf, which is 513 Bcf (-17.1%) lower than last year’s working gas totals of 2,995 Bcf at the same time and 154 Bcf (-5.8%) lower than the 5-year average of 2,636 Bcf.  The total working gas is within the five-year historical range.


Supply/Demand

  • For the week ending July 2nd, 2021, the EIA reported net injections into storage of 16 Bcf, which is less than last year’s net injection of 57 Bcf this week last year and less than the 5-year (2016-2020) average net injections of 63 Bcf.

  • Working natural gas in storage totaled 2,574 Bcf, which is 551 Bcf (-17.6%) lower than last year’s working gas totals of 3,125 Bcf at the same time and 190 Bcf (-6.9%) lower than the 5-year average of 2,764 Bcf.  The total working gas is within the five-year historical range.


Weather

  • A hot weather pattern for most of the Northern portion of the United States is forecast through the 8-14 window starting July 16th.

  • The Rocky Mountain States, Midwestern States, Middle Atlantic States, New England States, and California are forecast for above-normal temperatures.

  • The Southwestern States, Southern States, and Florida are forecast for a normal temperature pattern.  Texas is forecast for below-normal temperatures. 

  • The Rocky Mountain States along with the Northern Midwestern States have the highest probability for much above normal temperatures, while Texas has the highest probability of below normal temperatures.

  • In the 8-14 day window from July 16th through July 22nd, the Pacific Northwest, Rocky Mountain States, Midwestern States, and Florida are forecast for below-normal precipitation. 

  • The Southwestern States, Texas, Southern States, Middle Atlantic States, and the New England States are forecast for above-normal precipitation.   California is forecast for normal precipitation probability.


Questions or Comments?

Let TRUELight provide insightful market data and pricing expertise. 

Let's Talk

Article Topics:
#marketupdate