Southeast Power Tracker: July power prices up with stronger gas; forwards rise

Sharply higher natural gas prices outweighed lighter loads to boost day-ahead on-peak bilateral indexes across the Southeast US in July, compared with July 2020, and September forward packages showed similar strength, despite a relatively mild weather forecast.

S&P Global Platts assessed indexes at five locations across the Southeast as averaging in the mid-$40s/MWh in July, up from June averages in the mid-$30s/MWh and most of July 2020 averages in the mid-$20s/MWh except in Florida, where transmission and gas constraints resulted in the low-$30s/MWh averages.

Spot natural gas prices this July were more-than-double of the July 2020 averages, Platts data showed. At the Transco Zone 4 pipeline -- which is important for the Into Southern power contract -- prices averaged $3.774/MMBtu in July, up from $3.201/MMBtu in June and $1.734/MMBtu in July 2020.

Florida Gas Zone 3 spot gas averaged $3.84/MMBtu in July, up from $3.258/MMBtu in June and $1.809/MMBtu in July 2020.

Load levels in July were stronger than June but weaker than July 2020 levels, despite economic weakness due to the coronavirus pandemic last year.

In the North American Electric Reliability Corporation's SERC region -- formerly known as the Southeast Electric Reliability Council -- loads averaged 81 GW in July, up 2.4% from 84 GW in June but down almost 6% from 91.5 GW in July 2020, according to S&P Global Platts Analytics data.

In NERC's Florida Reliability Coordinating Council region, loads averaged 32.5 GW in July, up from 31.5 GW in June but down from July 2020's 33.2 GW.

The weather generally supported month-to-month load strength, but tended to weaken year-on-year changes, according to CustomWeather data.

Florida's population-weighted average cooling-degree days, or CDDs, in July were up 7.1% compared to June, but down 7.1% from July 2020 numbers. The population-weighted average temperature was 82.7 degrees Fahrenheit in July, up from this June's 81.5 degrees F but down from 84 degrees F in July 2020.

Georgia's population-weighted average CDDs in July were up 26.8% from June's CDDs but down 14.2% from July 2020's CDDs. The population-weighted average temperature was 79.1 degrees F in July, up from 76.3 degrees F in June but down from July 2020's 81.4 degrees F.

North Carolina's population-weighted averaged CDDs in July were up 36.5% from this June's CDDs but up barely 1.9% from July 2020's CDDs. The population-weighted average temperature was 79.1 degrees F in July, up from June's 75.5 degrees F but down from 81 degrees F in July 2020.

September outlook

The weather likely played a similarly mitigating role in September forward packages, as the National Weather Service's July 15 forecast for August, September and October indicated an increased probability -- 33% to 60% -- for above-normal temperatures across most of the Southeast, but this was likely mitigated by increased likelihood -- 33% to 50% -- for above-normal precipitation.

Increased soil moisture tends to absorb and mitigate extreme temperatures, according to meteorologists.

Into Southern September on-peak power averaged about $40.55/MWh in July, up from $36.15/MWh in June and up from the $28.80/MWh that September 2020 on-peak power averaged in July 2020. In September 2020, Into Southern day-ahead on-peak indexes averaged $23.26/MWh.

Florida September on-peak power averaged about $42.25/MWh in July, up from about $37.60/MWh in June and up from the $29.30/MWh that September 2020 on-peak power average in July 2020. In September 2020, Florida day-ahead on-peak indexes averaged $26.70/MWh.

While those percentage increases are impressive -- about 12.3% month-on-month and about 42% year-on-year -- they likely represent a substantial discount from what they would be if the full effect of natural gas prices were felt.

Transco Zone 4 September gas averaged $3.76/MMBtu this July, up from $3.238/MMBtu June and more-than-double the $1.779/MMBtu that September 2020 gas averaged in July 2020.

Florida Gas Zone 3 September gas averaged $3.873/MMBtu in July, up from $3.351/MMBtu in June and more-than-double the $1.861/MMBtu that September 2020 gas averaged in July 2020.

Generation mix

Stronger spot gas prices tended to diminish gas-fired generation's leading share in the SERC and FRCC region and strengthen that of coal-fired generation, according to Platts Analytics data.

In SERC, gas plants' share averaged 36.1% this July, up from June's 35.1% but down sharply from July 2020's 42.5%, while coal plants' share averaged 27% in July, up from June's 26.6% and July 2020's 24.3%. SERC's nuclear fleet had little change in output, and its share was 29.9% in July, down from June's 30.7% but up from July 2020's 27.1%.

In FRCC, gas plant's share averaged 73.4% this July, up from June's 71.6% but down from July 2020's 74.4%. Coal plants' share averaged 9.5% in July, down from June's 10.9% but up from July 2020's 9.3%.

The FRCC region's nuclear energy output was flat month to month and increased year on year. In terms of market share, nuclear had 12.2% of this July's stronger overall generation, down from this June's 12.7% but up from July 2020's 10.3%.