The continued growth of the Texas economy in June, as evidenced in new Federal Reserve Bank of Dallas surveys, has shown up with increased power demand and wholesale power prices in the Electric Reliability Council of Texas and the state's hub of the Midcontinent Independent System Operator.
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The Dallas Fed's Texas Service Sector Outlook Survey, released June 29, shows a revenue index of 16.7%, down from this May's 23.9%, but up sharply from June 2020's 6.8%.
The bank's Texas Manufacturing Outlook Survey, released June 28, shows a production index of 29.4%, up from this May's 15.7% and June 2020's 14.8%.
The Dallas Fed surveys' various indexes reflect the result when subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase. For example, the most recent survey had 42.2% of manufacturing survey respondents reporting an increase in production and 12.8% reporting a decrease, for a net positive 29.4%.
ERCOT's daily peakload has averaged about 63.4 GW through June 28, up from this May's 50.7 GW and June 2020's 60.6 GW.
Factors favoring stronger prices
Giuliano Bordignon, a power market analyst at S&P Global Platts Analytics, said ERCOT's population-weighted average cooling-degree days was not much higher than June 2020's, so power demand was about 4.5% higher on a weather-adjusted basis "than that predicted by our pre-COVID model, confirming that the economic recovery is a major factor."
This June, ERCOT North day-ahead on-peak locational marginal prices averaged $53.37/MWh through June 28, up from May's $27.64/MWh and June 2020's $22.90/MWh.
While economic recovery from pandemic levels contributed to price strength, so did a mid-month heat wave that caused real-time prices to top $1,000/MWh for some time, which added about $8/MWh to average ERCOT North around-the-clock real-time prices, Bordignon said, "meaning that each hour with a very tight system has a large contribution to overall prices."
Day-ahead power prices often reflect movements in real-time prices.
MISO load data for its Texas footprint is not posted on its website, but the peakload for the sprawling MISO footprint has averaged 98.4 GW through June 28, up from this May's 76.2 GW and June 2020's 94.4 GW.
Through June 28, MISO's population-weighted average cooling-degree days this June were about 4.5 times May's average and 10.6% more than June 2020's average CDDs, according to CustomWeather data.
MISO's Texas Hub serves a substantial fraction of the East Texas petrochemical complex, plus substantial population centers. Texas Hub day-ahead on-peak prices averaged $37.93/MWh this June, up from this May's $33.30/MWh and June 2020's $21.78/MWh.
Positive perceptions expressed
The surveys were conducted June 15-23 among 104 manufacturers and 282 service sector business executives.
Among the manufacturing survey respondents, the Dallas Fed said, "Perceptions of broader business conditions improved markedly in June."
"The general business activity index came in at 31.1, down slightly from its May reading but notably higher than its series average of 2.8 and indicative of greater activity," the Dallas Fed said in a statement announcing the survey results. "The company outlook index moved up six points to 27.5, a reading also well above the series average."
The future production index rose nine points to 56.6, and the future general business activity index rose six points to 37.3.
Among the service sector respondents, "Perceptions of broader business conditions remained positive, though slightless less optimistic than in May," the Dallas Fed said.
"The general business activity index fell four points from a record high to 36," the bank said. "The company outlook index fell from 26 to 21.7, though nearly 30% of respondents reported improved outlooks compared with last month."
The service sector survey respondent's general business activity index from May's record reading of 48.2 to this June's 43, while the future revenue index fell four points to 54.5, the Dallas Fed said.