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US Central, Northeast power prices spike on incoming high temperatures

Highlights

PJM, MISO issue warnings on the high temperatures

NYISO, ISO-NE peakload demand rallies

Spot power and gas prices in the Central and Northeast regions jumped notably June 4 as a warm spell was forecast to move into the region.

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Spot power prices in the Central region for June 7 delivery saw double digit spikes on the Intercontinental Exchange as the US National Weather Service forecast a warm spell to move into the area through June 12.

PJM issued a Hot Weather Alert on June 4 in response to the higher incoming temperatures to go into effect June 6 and June 7.

PJM West Hub day-ahead on-peak climbed about $12.50 on the day to trade around $45/MWh as Pittsburgh temperatures were forecast up 12 degrees to 88 Fahrenheit for June 7, and AEP Dayton Hub followed closely, rising about $11.50 to trade at $44/MWh. West Hub prices for this week rose 18.1% compared to last week at the same time, from an average of about $28.75/MWh to about $33.75/MWh.

Ahead of the warmup, PJM demand also saw significant inclines, with the forecast for June 7 set to rise 14.6% from June 4 levels to about 105 GW, according to grid operator data. Similar demand levels had not been seen since February of this year, when the winter storm that hit the US from Feb 15 through Feb 20 caused demand to rise to 107 GW.

The Midcontinent Independent System Operator also issued a Hot Weather Alert for much of its Central areas on June 2 set to go into effect on June 7 through June 11 as average temperatures were expected to average about 90 degrees Fahrenheit. Indiana Hub day-ahead on-peak rose $9 from its previous settlement to trade at $44.50/MWh, and the off-peak weekend strip for June 5 and 6 climbed about $10.25 on the day to price at $35/MWh. Day-ahead June 7 load was predicted to see a 9.2% increase from June 4 levels to 85.9 GW.

Midcon natural gas demand follows suit

The Midcon temperature increase was expected to push power demand in the region up by 3.1 Bcf/d, 700 MMcf above its average the past seven days, S&P Global Platts Analytics recorded. A higher power demand forecast was not limited to the Midcon market, across the Midwest power demand was expected to get a 1.4 Bcf boost to 5.16 Bcf/d June 7, 53% stronger than the five-year average at this time, after averaging 2.67 Bcf/d this past week.

Natural gas prices in the Midcontinent trended stronger on the year, with Chicago city-gate averaging $2.98/MMBtu so far this month, $1.32/MMBtu above levels last June. Natural Gas Pipeline-Midcon Pool has seen a similar rise averaging 77% higher than 2020, according to S&P Global Platts Analytics.

The eight- to 14-day outlook from the National Weather Service showed a strong probability for above normal temperatures in the Midwest, which could provide more upside risk to power demand and prices.

Northeast spot power climbs double digits

In ISO New England, Mass Hub for June 7 delivery jumped more than $20 to price around $50/MWh, while the corresponding weekend contract rose about $13 to price around $36.25/MWh.

Temperatures throughout the region were expected to remain above average for the week ended June 11, including three straight days with temperatures in the double digits above normal, according to Platts Analytics. In the week ended June 4, temperatures were at normal or below average for five straight days.

Tracking the weather, ISO New England peakload demand was forecast to average 19.48 GW over the weekend, while demand for June 7 was forecast to peak at 21.92 GW, up nearly 40% from the June 4 projection. This was the strongest forecast since August 2020.

In New York Independent System Operator, NYISO Zone G on-peak for June 7 delivery rose to $47/MWh, up from $30.25/MWh, while Zone A was valued in the lower $50s/MWh, rising from its previous settlement of $25.50/MWh.

NYISO demand was also expected to trend significantly higher over the next couple of days, with June 7 demand forecast to jump 35% to 25.80 GW, compared with June 4 forecast.

Northeast gas prices, demand rises

Gas prices in the Northeast have seen sharp increases over the last week following temperature forecast, with Algonquin city-gates trading at $2.87/MMBtu on June 4 for weekend flows, up from $1.985/MMBtu a week earlier, while Iroquois Zone 2 was trading 96.1 cents higher on the week at $2.996/MMBtu.

Total Northeast gas demand was expected to average 16.17 Bcf/d in the week ended June 11, which would be up 14.1% from a week earlier, according to Platts Analytics.

The majority of the increase was expected in the power sector, where gas demand was estimated at 10.12 Bcf/d, up 41.7% from a week earlier and the highest since 10.8 Bcf/d in the week ended Aug. 28, 2020.