US POWER TRACKER: Less Southeast price spike risk expected in Feb

A mild weather forecast combined with weaker natural gas forwards to cause Southeast US power traders to soften their expectations in December about February bilateral price risk, but energy forwards remained stronger than February 2023 spot levels, which were weakened by substantially milder temperatures.

The National Weather Service on Dec. 21 forecast a high likelihood for temperatures to be at or near normal levels in January, February and March across the Southeast. In contrast, CustomWeather calculated Georgia’s population-weighted average low temperature in February 2023 to be 40.5 F, more than 3 F above normal.

Despite the mild weather forecast, S&P Global Commodity Insights’ latest North American Electricity Short-Term Forecast, issued Nov. 30, indicated average load levels in the North American Electric Reliability Corporation's SERC Region, formerly known as the Southeast Electric Reliability Council, would surge by 23% to 84.7 GW.

S&P Global forecast the NERC Florida Reliability Coordinating Council's load levels to rise a more modest 5.8% to 26.5 GW.

S&P Global estimated December load levels to average about 76.4 GW in SERC and about 24.4 GW FRCC.

Forward markets

Platts’ M2MS Forward Curves for Into Southern February on-peak power averaged $40.10/MWh in December, down 14.5% from November’s average of more than $46.90/MWh and down 49.3% from the $79.15/MWh average for February 2023 power in December 2022. In February 2023, Platts assessed Into Southern day-ahead on-peak power at an average of about $25.55/MWh.

Transco Zone 4 natural gas, which is important for Into Southern power prices, had February forwards averaging $2.802/MMBtu in December, down 21% from the $3.548/MMBtu average in November and down 55.1% from the $6.246/MMBtu that February 2023 forwards averaged in December 2022. In February 2023, Transco Zone 4 spot gas averaged $2.331/MMBtu.
Florida February on-peak power averaged less than $34/MWh in December, down almost 16% from November’s average of almost $40.40/MWh and down almost 49.6% from the $67.33/MWh that February 2023 on-peak forwards averaged in December 2022. In February 2023, Platts assessed Florida power at an average of less than $31.25/MWh.

Florida Gas Zone 3 February forwards averaged $2.788/MMBtu in December, down 22% from the $3.576/MMBtu average in November 2023 and down 55.3% from the $6.241/MMBtu that February 2023 forwards averaged in December 2022. In February 2023, Florida Gas Zone 3 spot gas averaged $2.341/MMBtu.

Solar power on rise

S&P Global's forecast also indicates solar power, which has near-zero marginal costs and benefits from federal tax incentives, will provide about 4.8% of February’s generation in the FRCC footprint. This is up from 4% in December, when solar topped coal-fired generation to become the region’s third-largest generation supplier. Coal plants supplied 2.6% of FRCC’s power in December and are forecast to supply 4.6% in February 2024.

In February 2023, solar supplied 4.7% of FRCC power, while coal supplied 6.6%.

Gas-fired generation is forecast to retain its top spot at 74.4% of FRCC power in February, down from December’s 76.1% but up from February 2023’s 70%. Nuclear is forecast to retain the No. 2 spot at 13.3%, down from December's 14.3% and February 2023's 15.4%.

NERC’s larger SERC region has a more diverse generation mix, led in December by natural gas at 36.5%, nuclear at 33.3% and coal at 21.7%.

S&P Global forecast gas to supply 35.8% of SERC power in February, down from 38.2% in February 2023. Nuclear plants are forecast to supply 30.4% of SERC power in February, down from 33.6% in February 2023. Coal’s forecast is 25.2% in February, up sharply from February 2022’s 14.4%.

Aside from the Florida load pocket, Platts assessed Southeast bilateral indexes in the low $30s/MWh in December, down slightly from November and down by almost 57% from December 2022 averages in the mid-$70s/MWh.

Platts assessed Florida power to average about $42.65/MWh in December, down slightly from November 2023 but down almost 47% from December 2022’s average of more than $80/MWh, showed S&P Global data.