Florida braces for Milton as Southeast utilities restore power in Helene's wake

As electric utilities in the Carolinas and Georgia struggled Oct. 7 to restore service to the remaining customers offline totaling more than 263,000 in the wake of Hurricane Helene, Florida's utilities are preparing for Hurricane Milton, potentially the worst storm since 2017, scheduled to hit the peninsula mid-week.

Power outages associated with hurricanes usually coincide with lighter demand for power and gas, as well as weaker wholesale power prices.

On Sept. 27, the day after Helene made landfall in Florida's Big Bend Gulf Coast, peakloads in the North American Electric Reliability Corporation's Florida Reliability Coordinating Council and the SERC regions were down by more than 20%, compared with Sept. 20, the same day of the previous week, according to US Energy Information Administration data collected by S&P Global Commodity Insights. SERC was formerly known as the Southeast Electric Reliability Council.

Across four power pricing hubs, day-ahead on-peak prices for delivery Sept. 27 were down by more than $10, or 22.2%, compared with Sept. 20.

Platts-assessed Into Southern and Into GTC on-peak power traded Oct. 7 for Oct. 8 delivery around $32.50/MWh, down about $6.50 from the prior settlement values. Platts is part of Commodity Insights. Florida day-ahead on-peak bilaterals fell $6.50 to $40/MWh for Oct. 8 delivery.

Hurricanes' gas impact

Natural gas power burn in the Southeast on Sept. 27 was down by almost 25% from Sept. 20, Commodity Insights data shows, but average gas prices at the Transco Zone 4 and Florida Gas Zone 3 price points were up by 14.6%.

On Oct. 7, natural gas production from the US Gulf of Mexico was unchanged on the day at just under 1.9 Bcf, as output continued to recover from earlier shut-ins prompted by Hurricane Helene in late September. Over the past week, offshore production has averaged about 1.85 Bcf/d. Despite a move by Chevron on Oct. 7 to evacuate its Blind Faith platform, located about 160 miles southeast of New Orleans, Louisiana, the US Bureau of Safety and Environmental Enforcement has yet to issue any update on Gulf of Mexico oil and gas activity suggesting limited impact so far.

Along much of the US Gulf Coast, spot gas prices wobbled from their weekend settlement levels, with most locations moving up or down just 3-4 cents. However, at Florida Gas Zone 3, prices dropped 28 cents to around $2.56, according to preliminary settlement data from Commodity Insights.

The sharp, downward price movement could be in response to forecasts calling for cooler weather ahead. Over the next five days, Hurricane Milton is expected to drop the Southeast population-weighted temperature by about 2-3 degrees. By the coming weekend, gas-fired power demand will bottom-out around 8.8 Bcf/d -- down from just over 11 Bcf/d on Oct. 7, Commodity Insights data shows.

Milton becomes Category 5

Milton rapidly intensified Oct. 7 to a major Category 5 storm, with maximum sustained winds of 175 mph as of the National Hurricane Center's 1 pm CT advisory.

The hurricane center forecast storm surges to reach eight to 12 feet from the Anclote River, Florida, to Englewood, Florida, including Tampa Bay, as it makes landfall at about 8 pm ET Oct. 9.

Joel N. Myers, AccuWeather founder and executive chairman said that if Milton causes economic losses of $200 billion or more, on the heals of Helene's estimated costs of $225 billion to $250 billion, the combined impact of the storms could cut US GDP by 2%, which could complicate matters for the Federal Reserve.

"On the one hand, the Federal Reserve raises interest rates to reduce inflation," Myers said. "However, the storms cause inflation by increasing the costs of goods. On the other hand, the hurricanes are harmful to the economy causing some businesses to fail and others to struggle as a result of the disasters, so jobs are being lost, and people and businesses are facing a long tail of economic impacts from the disasters. The Federal Reserve has indicated that two more rate cuts are probable this year. The combined impact of the hurricanes will cause the economy to weaken but might also cause prices to rise and there is the quandary."

Florida prepares

Florida Emergency Management Director Kevin Guthrie urged Florida residents under evacuation orders to comply, and he said the state is preparing "for the largest evacuation that we have seen most likely since 2017's Hurricane Irma." Almost 6.8 million Floridians left their homes in Irma's path, resulting in large traffic jams on Interstate Highways 95 and 75, and the Florida Turnpike, according to the Florida Association of Counties.

"I would highly recommend that if anybody has the means to do so, you have the capability of going to a hotel or stay with friends and family, get on the road today, wherever that might be," Guthrie said. "Please, if you're in the Tampa Bay area, you need to evacuate. If they have called for your evacuation, I beg you, I implore you to evacuate. Drowning deaths due to storm surge are 100% preventable if you leave."

Florida Governor Ron DeSantis has declared an emergency in 51 of Florida's 67 counties, and several counties have ordered evacuations. DeSantis said in a Oct. 7 news briefing that he expected more counties would order evacuations that day.

"Time is going to start running out very, very soon," DeSantis said.

Helene's impact lingers

As of 1:30 pm ET, PowerOutage.US reported more about 263,000 customers offline across the Southeast, mainly because of Hurricane Helene, led by North Carolina with about 133,600 customers, Georgia with more than 78,000 and South Carolina with about 47,600.

Duke Energy had by far the largest number offline, at 104,445 in North Carolina and 23,362 offline in South Carolina.

Duke also has a big utility in Florida, however, and it said Oct. 7 it has mobilized about 10,000 workers to help restore service for more than 1 million power outages likely to result from Hurricane Milton.

"Based on the current track, Hurricane Milton will impact the most populated areas of our service territory," said Todd Fountain, Duke Energy Florida storm director. "Despite extensive system improvements and rigorous tree trimming, the strong winds and flooding will cause power outages. Customers should expect significant damage and make immediate preparations for extended power outage durations."