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Texas economic growth accelerates; power demand, prices higher on year

Highlights

Broader conditions outlook mixed

Power prices reflect weather, gas trends

The Texas manufacturing sector accelerated its expansion in November, a new survey from the Federal Reserve Bank of Dallas released Nov. 29 shows, which appears to be reflected in year-on-year increases in power demand and prices.

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The Dallas Fed's Texas Manufacturing Outlook Survey shows a production index of 27.4%, up from October's 18.3% and November 2020's 8.7%.

The survey's various indexes reflect the result when subtracting the percent of respondents reporting a decrease from the percentage reporting an increase. In the most recent survey, 38.2% of respondents reported an increase in production and a 10.8% reporting a decrease, for a net positive 27.4%.

For Nov. 1 through Nov. 28, peakloads in the Electric Reliability Council of Texas averaged 43.2 GW, down from October's 53 GW but up from November 2020's 42.5 GW.

"Perceptions of broader business conditions were mixed in November," the Dallas Fed said in a statement. "The general business activity index remained positive, indicating an improvement in activity from October, though it eased three points to 11.8. The company outlook index came in at 1.3, with the near-zero reading indicating little change in outlooks from October. Uncertainty continued to rise, with the outlook uncertainty index holding fairly steady at a highly elevated reading of 27.7."

Weather factors likely had a big impact on ERCOT power demand growth and wholesale power price trends this November. Combined heating- and cooling-degree days in November have so far had a daily population-weighted average that is 11% less than in October but 12.8% more than in November 2020, according to CustomWeather data.

ERCOT North, MISO Texas prices

At the ERCOT North Hub, day-ahead on-peak locational marginal prices have averaged $43.88/MWh in November, down from October's $62.92/MWh but up sharply from November 2020's $27.04/MWh.

The Midcontinent Independent System Operator includes a significant fraction of Texas' East Texas petrochemical complex, and the MISO Texas Hub so far in November have averaged $55.31/MWh, down from October's $61.44/MWh but up from November 2020's $28.54/MWh.

Natural gas prices also had an impact on November's power prices. At the Houston Ship Channel, spot gas this November has averaged $4.788/MMBtu, down from October's $5.29/MMBtu but up from November 2020's $2.597/MMBtu.

"Expectations regarding future manufacturing activity were generally more positive in November," the Dallas Fed said. "The future production index moved up five points to 51.7, and the future general business activity index jumped 14 points to 28.6. Other measures of future manufacturing activity showed mixed movements but remained solidly in positive territory."

Data was collected Nov. 15-23 from 95 Texas manufacturers.