Southeast Power Tracker: Indexes slide with economy, pandemic, gas prices

Southeast US day-ahead on-peak power indexes plunged in May by about 40%, year on year, as milder weather combined with the novel coronavirus pandemic and weakening economy to sap demand in most areas, and natural gas prices stayed cheap. July and August power forwards followed suit.

Among the five pricing points in S&P Global Platts' monthly Southeast Power Trackers, day-ahead on-peak indexes fell the most in Florida, down almost 46% year on year to average about $21.40/MWh this May, which was also down about 4.6% from April's average of $22.44/MWh.

The smallest percentage decrease was at the Tennessee Valley Authority, down 37.7% on the year to about $19.68/MWh, which was up 1.1% from April's $19.45/MWh.

Collectively, the Southeast's year-on-year percentage drop was larger than the other seven regions included in Platts' monthly Power Trackers.

Power demand levels in the North American Electric Reliability Corporation's SERC region, which covers the Southeast aside from most of Florida, averaged 66.4 GW this May, down almost 13% from May 2019 average levels, but up 11.6% from this April's 59.5 GW.

In NERC's Florida Reliability Coordinating Council footprint, power demand was up on the month and year, averaging 27.9 GW this May, compared with May 2019's 23.3 GW and this April's 26.7 GW.

Of the 43 states that implemented pandemic-related stay-home policies in April, only Kentucky, Mississippi and Montana started lowering restrictions earlier than Florida, which did so April 30.

Florida's combined population-weighted average heating- and cooling-degree days this May were about 17.1% lower than May 2019's average, but 17.3% higher than April's average.

Elsewhere in the South, population-weighted average total HDDs and CDDs were mixed. In Georgia, this May's total was 35.5% lower than May 2019 but 37.3% higher than this April. In North Carolina, this May's total was 19.6% lower than May 2019 and 7.4% lower than this April.

Spot natural gas prices rose 2.9% from April to average $1.687/MMBtu this May, at the Transco Zone 4 pipeline, which is important for the Into Southern Company bilateral power index. This was down 33.6% from May 2019's $2.541/MMBtu.

At the Florida Gas Zone 3 pipeline, spot gas averaged $1.702/MMBtu this May, up 3.3% from April but down 34.4% from May 2019's $2.595/MMBtu.

Generation mix

Cheap gas contributed to surging gas-fired generation output, providing 42.7% of SERC's power this May, up from 33.8% this April and 36.2% in May 2019. The gas fleet supplied 73.2% of FRCC's power this may, down from this April's 76.8% but up from May 2019's 70.1%.

The coal-fired fleet's share of the FRCC market continued its year-on-year decline, falling to 6.8% this May, compared with 8.9% in May 2019, but up from this April's 6.2%.

Similarly, coal plants in SERC supplied just 14.3% of generation this May, down from May 2019's 25.3% but up from this April's 14%.

In SERC, nuclear generation's share was almost 33%, which was up from May 2019's 32.2% but down from this April's 38.5%. In FRCC, nuclear's share was 13.2%, down from May 2019's 14.1% but up from this April's 12%.

Forward markets

Looking forward, July and August on-peak packages were down both in comparison with where they traded in April and in comparison with what the July and August 2019 on-peak packages traded in May 2019. These trends mirrored natural gas forwards and may reflect more the weakening of the US economy in the face of the coronavirus pandemic than weather forecasts.

Into Southern July on-peak forwards averaged less than $28/MWh this May, down from this April's $28.65/MWh and the $35.03/MWh that July 2019 on-peak averaged in May 2019.

Into Southern August on-peak forwards averaged about $27.75/MWh this May, down from about $28.10/MWh this April and down from the $32.85/MWh that August 2019 on-peak averaged in May 2019.

Florida power July on-peak forwards averaged about $29.75/MWh this May, down from this April's $30.30/MWh and the $37.15/MWh that July 2019 on-peak averaged in May 2019.

Florida August on-peak forwards averaged about $29.45/MWh this May, almost flat with this April's $29.60/MWh and down from the $34.40/MWh that August on-peak averaged in May 2019.

Natural gas forward prices:

1. Transco Zone 4 July: $1.933/MMBtu this May, $2.017/MMBtu this April, $2.556/MMBtu for July 2019 gas in May 2019
2. Transco Zone 4 August: $2.028/MMBtu this May, $2.112/MMBtu this April, $2.571/MMBtu for August 2019 gas in May 2019
3. Florida Gas Zone 3 July: $2.01/MMBtu this May, $2.10/MMBtu this April, $2.626/MMBtu for July 2019 gas in May 2019
4. Florida Gas Zone 3 August: $2.10/MMBtu this May, $2.185/MMBtu this April, $2.641/MMBtu for August 2019 gas in May 2019

The National Weather Service on May 21 forecast enhanced chances for above-normal temperatures across almost all of the Southeast except northern Mississippi and western Tennessee for the July-August-September time frame.

The most recent unemployment rates in the region, April's numbers released May 22, spiked across the Southeast, from a low of 11.9% in Georgia to a high of 15.4% in Mississippi.