MISO POWER TRACKER: Shifts in gas, coal prices paint mixed February power price picture

Midcontinent Independent System Operator day-ahead on-peak power prices were mixed – lower in the North, higher in the South – in February, compared with January, and were down sharply from February 2021, when a deadly winter storm caused rotating blackouts and price spikes across the region.

April forward packages followed natural gas higher during the month.

The mixed daily pricing picture reflects the varied fuel mix in MISO's massive footprint, said Morris Greenberg, senior manager of North American power analytics at S&P Global Commodity Insights. MISO North relies more on wind and coal, and MISO South uses more gas-fired generation, he said.

The Powder River Basin coal price drop weakened power prices in the northern part of the footprint from January to February, Greenberg said. And the Gulf Coast gas price increase from January to February strengthened prices in MISO's southern footprint, he said.

In the near term, very cold weather is expected to move into the upper Midwest, which should support MISO North power prices, particularly if the weather is accompanied by low wind speeds, Greenberg said. "Beyond that, gas prices have continued to rise and PRB has fallen so [one] would expect the trend to reassert itself in late March/April," he said.

February prices

Among pricing hubs included in this analysis, day-ahead on-peak locational marginal prices in MISO North had the largest drop at the MISO Indiana Hub, averaging $53.96/MWh in February, down 10% from January and 34% from February 2021, Commodity Insights data shows.

MISO South prices rose month on month but were vastly lower than in February 2021. MISO Texas Hub day-ahead, on peak prices averaged $42.71/MWh, up 11.3% from January but down 72% from February 2021.

S&P Global Commodity Insights'' assessment for PRB 8,800 Btu/lb prompt-month coal averaged $21.17/st in February, compared with $26.71/st in January. Coal steadily decreased in price since opening Jan. 3 at $28.25/st, the highest level so far this year. It fell to $18.25/st to close out February.

Henry Hub spot gas averaged $4.673/MMBtu in February, up 9.4% from January but down 9.2% from February 2021. Chicago City-gates gas averaged $4.483/MMBtu in February, increasing 7.6% from January and decreasing 80.3% year on year.

MISO North had higher average monthly temperatures across the board according to the US National Weather Service. Temperatures in Detroit averaged a 6.1 F degree rise from January to February, and Minnesota had a 4 degree increase month on month. In comparison, temperatures in MISO South regions were mixed.

The average daily power burn for MISO's gas generation fleet was about 3.3 Bcf/d in February, down from 3.9 Bcf/d in January and less than that 3.4 Bcf/d burned in February 2021, according to S&P Global Platts Commodity Insights data. Daily power burn is projected to be about 3 Bcf/d in April 2022, assuming a heat rate similar to April 2021, according to the data.

Population-weighted daily temperatures averaged 25.2 degrees Fahrenheit in February, 28.6% higher than January and 29.2% higher than February 2021, according to CustomWeather data. February's population-weighted average heating-degree days were 12.6% lower than January and 12.7% lower than February 2021.

Forward markets

Looking ahead, higher gas forwards boosted power forwards compared with year-ago packages.

Indiana Hub on-peak April 2022 averaged $54.28/MWh in February, 76.5% higher than the $30.76/MWh that April 2021 forwards averaged in February 2021. April 2022 forwards also rose 11.1% from $48.84/MWh in January 2022.

Louisiana Hub on-peak April 2022 averaged $50.14/MWh in February, up 69.4% from the $29.60/MWh that April 2021 forwards averaged in February 2021. April 2022 on-peak averaged $44.68/MWh in January 2022.

Henry Hub April gas averaged $4.392/MMBtu in February, up 53% from the $2.870/MMBtu that April 2021 gas averaged in February 2021, and up 12.4% from the $3.908/MMBtu that April 2022 gas averaged in January.

Chicago city-gates April gas averaged $4.245/MMBtu in February, up 52.6% from the $2.781/MMBtu that April 2021 gas averaged in February 2021, and up 12.4% from the $3.818/MMBtu that April 2022 gas averaged in January.

Generation mix

Coal generated 37.4% of MISO's average daily power in February, up slightly from the 37.0% in January but down from 45.1% in February 2021. Gas-fired plants provided 26.6% of MISO's power in February, down from 29.8% in January but up from 25.5% in February 2021. The boost in gas-fired share compared to February 2021 is to be expected since the February 2021 storm resulted in gas supply freeze-offs.

Meanwhile, wind generated 18.4% of the grid operator's average daily power in February, up from 16.5% in January and 11.6% in February 2021. The February 2021 storm also had icing impacts on the region's wind turbines.