Texas economic indicators up in December with below-average energy prices

Three key Texas economic indicators improved in December, likely influenced by low power and natural gas prices, a new survey of businesses released by the Federal Reserve Bank of Dallas shows, and the six-month outlook remained positive, which may be bullish for power and gas prices.

The Dallas Fed's Service Sector Outlook Survey, released Dec. 31, shows a revenue index of 13.8%, reflecting the difference between the 31.7% of survey respondents reporting a month-to-month increase and the 17.9% reporting a decrease. The December revenue index was up from 10.9% in November and 4% in December 2023.

The Texas Retail Outlook Survey, released with the service sector survey, shows a retail sales index of 17.3%, reflecting the difference between the 36.2% of respondents reporting a month-to-month increase and the 18.9% reporting a decrease. The December retail sales index was up from 4.6% in November and minus 2.2% in December 2023.

No data was released regarding how many of the 271 service sector responses were included in the retail outlook survey. Past retail sector responses have been about 20% of overall service sector responses.

The Texas Manufacturing Outlook Survey, released Dec. 30, shows production index of 3.9%, reflecting the difference between the 30.5% of respondents reporting a month-to-month increase and the 26.6% reporting a decrease. The November production index was minus 0.9%, and the December 2023 index was 1.2%.

The Dallas Fed contacted 122 Texas manufacturers Dec. 17-25 for the survey and received 87 responses.

Energy fundamentals a factor

In the Electric Reliability Council of Texas market, North Hub day-ahead on-peak locational marginal prices averaged $26.82/MWh, up slightly from November's $26.28/MWh and up almost 29% from December 2023, according to ERCOT data collected by S&P Global Commodity Insights. However, the latest ERCOT North Hub day-ahead on-peak LMPs in December were down from the December average of $33.39/MWh for 2019-23.

One should note that December 2024 weather has been much cooler than November, with ERCOT combined population-weighted average heating and cooling degree days in December up by more than 48% from November, but down 12.3% from December 2023, CustomWeather data shows.

ERCOT peakloads averaged 51.8GW through Dec. 30, down almost 2% from November's 52.8 GW, but up 5.1% from December 2023's 49.3 GW, ERCOT data collected by Commodity Insights shows.

ERCOT's power burn has been down both on the month and the year, averaging 3.7 Bcf/d through Dec. 30, compared with November's 3.9 Bcf/d and December 2023's 3.8 Bcf/d, Commodity Insights data shows.

Midcontinent Independent System Operator Texas Hub, which serves much of the East Texas petrochemical complex, had day-ahead on-peak average LMPs averaging $31.51/MWh in December, up almost 18% from November's $26.73/MWh and up 15.5% from December 2023's $27.27/MWh, according to MISO data collected by Commodity Insights. However, the latest Texas Hub average was down from the December average of $32.52/MWh for 2019-23.

Six-month outlook positive

"Expectations are for increased manufacturing activity six months from now," the Dallas Fed said. "The future production index remained positive but decreased to 32.7% from 44% ... The future general business activity index fell to 20.6% from 31.2%. Other indexes of future manufacturing activity retreated this month but remained positive."

The Platts M2MS Power Forward Curves set ERCOT North Hub June on-peak power on Dec. 30 at $56.48/MWh, compared with June 2023's day-ahead on-peak LMPs averaging $33.30/MWh. MISO Texas Hub June on-peak power was $50.95/MWh, compared with June 2023's day-ahead on-peak LMPs averaging $34.78/MWh.

Platts-assessed Houston Ship Channel spot gas averaged $2.84/MMBtu in December, up 6.1% from November's average of $2.677/MMBtu and 38.7% from December 2023's $2.047/MMBtu. Platts is part of Commodity Insights. However, the latest Houston Ship Channel average was down from the December average of $2.921/MMBtu for 2019-23.

The Platts M2MS Gas Forward Curves set Houston Ship Channel June gas on Dec. 30 at $3.036/MMBtu, compared with June 2023's spot assessments averaging $2.139/MMBtu.