West Power Tracker: December prices sink on lower natural gas prices despite higher load

New York — Weaker gas prices pulled down power prices across the Western region nearly 30% year on year in December, as cheaper gas prices helped drive up thermal fuel generation. Power forwards continued to follow weaker gas forwards lower.

Cal-ISO peakload increased 3% month on month to average 28,357 MW in December, as Bonneville Power Administration peakload also rose 3% to average 7,905 MW, according to grid operator data.

Los Angeles had 22% more heating-degrees days in December than normal, as Sacramento had 24% more than normal, according to the US National Weather Service data. Portland had nearly 9% more heating-degrees days in December than normal, while Phoenix had 15% more.

SPOT MARKETS

Across the five pricing hubs used in S&P Global Platts' monthly power analyses, COB on-peak day-ahead had the largest year-on-year drop at 32.9% to average $35.38/MWh in December, according to S&P Global Platts assessments.

In the Southwest, Palo Verde on-peak day-ahead average $28.70/MWh, down 23.3% month on month, the biggest month-on-month movement across the region.

In California, SP15 on-peak day-ahead location marginal price fell 23.9% year on year to average $42.10/MWh, as the day-ahead to real-time spread averaged negative $5.58 for on-peak and negative $2.62 for off-peak, according to ISO data.

Helping drive down California power prices, spot gas at SoCal plunged nearly 32% year on year to average $5.433/MMBtu in December, but was up 16% month on month, according to Platts data. SoCal prices have jumped more than 90% since July 2019 likely due to higher on system-demand and various constraints along the SoCal system.

GENERATION MIX

Thermal generation remained the lead fuel source around 40% of the total mix in December, jumping 7.5 percentage points year on year, according to ISO data. Thermal output averaged 240,055 MWh/day for the month, an increase of nearly 28.5% year on year.

Imports were the second source of generation at nearly 29% of the market share and averaged 173,072 MWh/d in December, up almost 10% month on month.

Hydro accounted for 9.5% of the total fuel mix, up 1.5 percentage points month on month, as hydro output averaged 56,838 MWh/d, up nearly 25% from November.

In contrast, solar generation tumbled 9.1 percentage points month on month to about 6.5% of the total market share, as output plunged 57% month on month to average 38,095 MWh/d.

Cal-ISO total generation averaged 597,159, up 5.4% month on month and up 4.7% year on year.

In the Northwest, hydro remained the lead fuel source at 72.4% of the total fuel mix in December, despite output falling 1.2% year on year to average 168,022 MWh/d, according to BPA data.

Thermal generation increased nearly 3 percentage points month on month to make up nearly 12% of the market share, as output jumped almost 35% month on month to average 27,344 MWh/d.

BPA total generation averaged 231,949 MWh/d, down 4% year on year, as interchange generation dropped 13.4% year on year and was down 9.4% month on month to average 64,231 MWh/d, according to BPA data.

FORWARD MARKETS

Across the West, power forwards followed lower gas forwards lower.

The SoCal gas January contract averaged $3.092/MMBtu, a drop of nearly 39% from where the 2019 contract averaged a year ago, according to Platts data. The February contract averaged $2.880/MWh, down 30%, while the March contract averaged $2.2748/MMBtu, down 26%.

SP15 on-peak January averaged $45.65/MWh, down 24.3% from where the 2019 package averaged last year, but up 5% month on month. The 2020 package rolled off the curve at $46.05/MWh, $4.20 lower than where the 2019 package ended.

Similarly, SP15 on-peak February averaged $41.80/MWh, a decrease of $23.7% from the 2019 counterpart the same time a year ago, while on-peak March averaged $31.26/MWh, down 26.3%.