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Cal-ISO declares restricted maintenance operation on heat, high loads; prices spike

Highlights

Cal-ISO forecast peakload up 10.6% to 39.953 GW June 15

SP15 LMP up 77% on day, bal-week offered at $425

SoCal city-gate prices up 126% on day for June 15

The California Independent System Operator has declared restricted maintenance operations through June 18 to high load from above-normal temperatures, driving up cooling demand as well as wholesale power and gas prices across the region.

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The restricted maintenance operation declarations are in effect from noon to 10 pm daily until June 18, according to ISO noticed issued June 11. The declaration "requires generators and transmission operators to postpone any planned outages for routine equipment maintenance, ensuring all grid assets are available for use," according to the ISO System, Alerts, Warnings and Emergencies fact sheet.

"We are closely monitoring weather conditions," Cal-ISO spokeswoman Anne Gonzales said in an email June 14. "Overall, while we don't anticipate rotating power outages, we are headed into some record-breaking high heat territory, and we may call a Flex Alert if needed."

If a Flex Alert is called, reducing electricity use will be crucial to preventing further emergency actions, including rotating power outages, to protect grid integrity, Gonzales said.

Weather outlook

A record-breaking heatwave in the western and central US this week could lead to fire danger, according to the US National Weather Service. Daily record temperatures are likely over the next few days in California, Intermountain West, Desert Southwest, Rockies and High Plains, with temperatures well into the 110s degrees Fahrenheit forecast for the next few days in the Desert Southwest.

Excessive heat warnings and watches, as well as heat advisories, are in effect, according to NWS.

"Given the heat, dry conditions and gusty winds, elevated to critical risks of fire weather are in place across the Great Basin and portions of southern California through at least [June 15]," according to the NWS.

Cal-ISO population-weighted cooling-degree days so far in June are 50% higher than normal and up 61% from May, according to CustomWeather data.

Cal-ISO forecast peakload at around 39.953 GW June 15, up 10.6% day on day, and then around 39.3 GW June 16, 41.5 GW June 17 and 41.2 GW June 18. In comparison, peakload has averaged 30.5 GW so far this month, while June 2020 peakload averaged 31.965 GW, according to ISO data.

Power prices climb

As high temperatures push up load across the region, more demand is driving up power prices. However, prices are not near the record highs experienced last summer.

SP15 on-peak day-ahead traded in the low-$190s/MWh for June 15 delivery on the Intercontinental Exchange, up 77% day on day, while the 15-minute market was bid at $95/MWh and offered at $185/MWh for June 15 delivery. The weather event was also driving up prices later in the week, with SP15 on-peak balance-of-the-week bid at $225/MWh and offered at $425/MWh on ICE. Month-to-date SP15 on-peak day-ahead locational marginal prices have averaged in the mid-$30s/MWh, up 68% from the June 2020 average, according to ISO data.

Likewise, NP15 on-peak day-ahead traded in the mid-$90s/MWh on ICE, up 6.6% day on day on ICE, while the on-peak balance-week package was bid at $70/MWh and offered at $300/MWh. In comparison, NP15 on-peak day-ahead LMP has averaged in the upper $30s/MWh so far this month, 67% higher than the June 2020 average, according to ISO data.

Further north, NOB on-peak day-ahead traded in the low-$250s/MWh for June 15 delivery on ICE, while Mid-C on-peak balance-of-the-month was bid at $80/MWh and offered ay $250/MWh.

In the Dessert Southwest, Palo Verde on-peak day-ahead traded in the upper $330s/MWh for June 15 delivery on ICE, a jump of 1,163% day on day, with on-peak balance-week bid at $375/MWh and offered at $1,025/MWh. Four Corns and Mead each traded above $400/MWh, while Mona traded in the mid-$350s/MWh. West Wing on-peak day-ahead was bid at $250.50/MWh and offered at $410/MWh.

Higher gas prices also helped to drive up power prices.

Gas prices jump

Spot gas at SoCal city-gate traded at $8.2343/MMBtu for June 15 flow on ICE, a jump of 126% day on day. The premium to Henry Hub cash lifted $4.52/MMBtu on the day to $4.96/MMBtu June 14, its highest level since Platts began recording prices. Prices have been elevated year on year, averaging about $1.39/MMBtu this month.

Total Southwest demand averaged 3% higher year on year so far in June, Platts Analytics data showed. Specifically, power burn in the region has averaged 3.52 Bcf/d -- 631 MMcf/d above last month and 35 MMcf/d above 2020.

The West experienced high temperatures throughout June and is expected to have a 60%-70% probability of remaining above normal over the next six-10 days, National Oceanic and Atmospheric Administration data recorded. Continued elevated temperatures could lift power demand further and provide support to prices moving forward.

The SoCal city-gate average for the remaining summer contracts (July-October 2020) increased $0.94/MMBtu since the beginning of the month to $6.87/MMBtu June 11, according to Platts data. August is currently the highest priced summer month at $7.58/MMBtu.

Power forwards reach records

Amid excessive heat advisories and triple-digit temperatures, power forwards hiked to record-breaking levels.

In the Southwest, Palo Verde on-peak July reached a record high of $267.80/MWh June 10, about 410% above the 2020 package a year ago, and is currently in the low-$260s/MWh, according to Platts data. The August package reached a record high of $262/MWh June 7, around 360% higher than its 2020 counterpart, and is currently in the mid-$250s/MWh. On-peak September also recorded its highest level of $152.95/MWh June 7, 277% above where the 2020 package was a year ago and up $38 from the previous week. It is currently in the upper-$140s/MWh.

Following suit, SP15 on-peak July hit a record high of $160.05/MWh on June 10, up around 283% from its 2020 counterpart, according to Platts data. The August and September packages reached highs June 7, surging 271% to $175.50/MWh and 209% to $129.95/MWh, respectively.

Background

The majority of western wholesale power trading locations reached record high prices in August 2020, during a week-long heatwave that led to back-to-back days of rotating outages.

SP15 on-peak day-ahead LMP reach a record high of $697.1/MWh Aug.18, 2020 as COB on-peak day-ahead reached $499.23/MWh, according to ISO and Platts pricing data. Likewise, on Aug. 19, 2020 NOB reach $487/MWh, Palo Verde reached $1,643.25/MWh, West Wing reached $1,645/MWh, Pinnacle Peak reached $1,6655.75/MWh, Four Corner reached $1,618.25/MWh, Mead reached $1,380/MWh and Mona reached $1,200/MWh -- all record high prices, according to Platts data.