PJM Tracker: Mild weather, light loads, cheap gas weaken Feb power prices

Houston — Mild weather and cheap natural gas pushed wholesale power prices in the PJM Interconnection down both on the month and the year, and spring forward packages followed suit in reaction to lower natural gas futures and above-normal temperature forecasts.

Day-ahead on-peak locational marginal prices at the three hubs included in Platts' monthly Tracker analysis averaged in the low $20s/MWh in February, down about 10% from January and down about 25% in comparison with February 2019.

Mild weather was a significant contributor to the lower prices, with this February's population-weighted heating-degree days averaging 0.6% fewer than this January and 8.3% fewer than last February, according to CustomWeather.

Population-weighted daily temperatures averaged around 37.9 degrees Fahrenheit this February, up from 37.8 F in January and 35.5 F in February 2019.

The mild weather put downward pressure on power demand, with peakloads averaging just 99.6 GW this February, down 2.2% from this January's 101.9 GW and down 4.2% from February 2019's 104 GW.

Low natural gas prices also contributed to lower power prices. At the Texas Eastern M3 pipeline, spot gas averaged just $1.764/MMBtu this February, down 15.4% from January's average of $2.085/MMBtu and down 34.6% from February 2019's $2.699/MMBtu.

GENERATION MIX

With such low gas prices, it is unsurprising that the gas fleet's leading share of PJM's average daily power output was up on the month and year. This February's share was 39.4%, up from 39.2% this January and 35.1% last February.

Wind's share was also up on the month and year. This February's share was 3.8%, up from 3.6% this January and 3.3% last February.

Coal-fired generation's share was up on the month but down sharply on the year. This February's share was 19.5%, up from 18.6% this January but down from 24.5% last February.

Nuclear power's share this February, at 33.6%, as the same as last February's share, but down from this January's 35.1%.

FORWARD MARKETS

Looking forward, spring on-peak packages were down along with natural gas forwards and forecast's for mild spring temperatures.

In particular, PJM West March and April on-peak packages this February were down both in comparison with this January's averages and in comparison with the March and April 2019 packages in February 2019.

PJM West March 2020 averaged $25.65/MWh this February, down from its $28.76 average this January and down from the March 2019 average of $35.87h in February 2019.

PJM West April 2020 averaged $26.13/MWh this February, down from its $28.10 average this January and down from the April 2019 average of $36.05 in February 2019.

Tetco M3 March 2020 gas averaged $1.778/MMBtu this February, down from this January's average of $2.164 and down from the $2.749 average for March 2019 gas in February 2019.

Tetco M3 April 2020 gas averaged $1.656/MMBtu this February, down from this January's average of $1.826 and down from the $2.542 average for April 2019 gas in February 2019.

The National Weather Service's forecast for March, issued February 29, indicated enhanced chances – 50% to 70% -- for above-normal temperatures throughout PJM. The forecast for the March-April-May time period, issued February 20, also indicated enhanced chances – 33% to 50% -- for above-normal temperatures throughout the region, except for Northern Illinois, which is expected to have near-normal temperatures.