US POWER TRACKER: Southeast prices to dip on cheap gas, mild forecast

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Substantially cheaper natural gas, a mild weather forecast and increased nuclear output are likely to weaken wholesale power prices in the Southeast substantially in December, compared with December 2022, judging by forward prices in October.

For example, S&P Global Commodity Insights assessed Into Southern December on-peak packages to average about $45.40/MWh in October, down 41.4% from December 2022's $77.55/MWh in October 2022. Florida December on-peak power averaged about $44.80/MWh in October, down 33.1% from December 2022's $63.41/MWh in October 2022.

Platts-assessed December natural gas at the Transco Zone 4 price point averaged $3.687/MMBtu in October, down 46.6% from December 2022's $6.91/MMBtu in October 2022. Transco Zone 4 is important for Into Southern bilateral power pricing.

Florida Gas Zone 3 December natural gas averaged $3.774/MMBtu in October, down almost 46% from December's $6.984/MMBtu in October 2022.

The National Weather Service's latest long-lead forecast, issued Oct. 19, called for equal chances to be above or below normal throughout most of the region except in the Carolinas and parts of Tennessee, where the chance is 33% to 40% higher for above-normal temperatures.

Nuclear power's role

In October the third unit of Georgia Power's Vogtle nuclear power station expanded nuclear's share to lead the SERC Region's generation mix, displacing natural gas-fired generation's September leading share, according to S&P Global Commodity Insights' North American Electricity Short-Term Forecast.

The North American Electric Reliability Corporation's SERC Region was formerly known as the Southeast Electric Reliability Council and encompasses most of the Southeast except Florida, for which NERC's Florida Reliability Coordinating Council has responsibility.

Nuclear power supplied 41.8% of SERC's power in October, up from 35.3% in September and 33.1% in October 2022. Gas-fired generation supplied 35.6% of SERC's power in October, down from 39.1% in September and 36.5% in October 2022.

Nuclear's leadership in generation mix may be short-lived, however. S&P Global forecasts nuclear's share to fall below 34%, while gas' share would rise to about 38.5%.

Gas-fired generation expanded its commanding lead in the FRCC region at 74.5% of supply, up from 71.7% in September and 72.2% in October 2022.

Weaker year-on-year power prices would continue a trend that showed up in October, as Platts-assessed day-ahead on-peak bilateral indexes were down at five price points by 47.6% from October 2022 and down 1.7% from September. Most of those indexes averaged in the mid-$30s/MWh, with only the Florida power index averaging around $43.50/MWh.

Transco Zone 4 spot gas averaged $2.931/MMBtu in October, down 47.2% from October 2022's $5.547/MMtu but up 4.2% from this September's $2.814/MMBtu, according to S&P Global data.

Florida Gas spot gas averaged $3.07/MMBtu in October, down 45.4% from October 2022's $5.625/MMBtu but up 2.3% from this September's $3/MMBtu.

Weather and loads

Other factors suppressing prices in the Southeast this October were weather and loads.

Population-weighted average heating degree days averaged more than 43% lower this October, compared with October 2022, according to CustomWeather data.

S&P Global showed that load levels in the SERC region averaged 60.2 GW in October, down 7.4% from October 2022's 64.9 GW and down 16% from September's 71.6 GW.

In the FRCC region, load levels in SERC averaged 27.2 GW in October, virtually flat with October 2022's 27.3 GW but down 19.7% from September's 33.9 GW.