Weekly Power Outlet US - 2024 - Week 38

If you turned on Bloomberg TV or CNBC this morning and they were talking about the best performing sectors of the year, what would be the guess? Obviously, semiconductors given Nvidia or maybe software driven by AI and cyber security? Those would be good guesses, but both wrong. Believe it or not, utilities are leading the pack with a YTD return near 26%.

We've discussed in the WPO about how, this year, questions from analysts on investor calls had gone from stewardship of capex capital spending to growth related, especially pertaining to AI and load demand. Last week Microsoft shocked the market with its announcement that it had signed a PPA with Constellation (CEG) amounting to north of $100/MW for 20 years for the reopening of Three Mile Island nuclear station. That announcement alone drove the stock price of CEG higher by over 20%.

The WPO isn't an investing newsletter providing investment advice. For the most part we just try to disseminate things we see in the world of electricity. Right now, driven by compute power load growth, the story of old economy utility companies is morphing into new economy growth stories. In other words, these aren't your grandparent clipping dividend coupon stocks right now.

Last week we highlighted a disagreement between MISO and their Independent Market Monitor regarding their long term transmission planning. Our intent is not to make this a weekly topic, but this week we get to comment on PJM and its IMM disagreement.

This kerfuffle is over the IMM's report late last week regarding the recent and upcoming capacity market auctions. In their words, the report "explains and quantifies the impact of specific critical market design choices in the 2025/2026 BRA.". The highlight of the report is the IMM saying that because of the changed market outcome metric, or how they qualify and quantify capacity participants, the latest auction resulted in roughly $4.4 billion of extra revenue (collect from load to pay generation or demand response). PJM shifted from an EFORd available metric to effective load carrying capability (ELCC) which is described in the report. PJM is looking to counter the argument in their own report so this could get interesting.

It goes without saying that Hurricane Helene is going to be a life changing event for many. It is not lost on us that market comments are secondary to real life events. We hope the best for all.

In the past we've rehashed some history on natural gas and hurricanes. Before fracking, it was a given that a Gulf storm would send prices rocketing up as the major gas supplier of the US would be shut down during and maybe even after the storm passed. Since fracking, storms in the Gulf have been viewed as possible disruptions to LNG export capacity which would leave domestic production land locked in the US. Early this week as TS Helene churned in the Gulf, predictions of major hurricane started to hit the newswires, and the gas market actually spiked. As the storm has turned into a major hurricane, it looks like most of the Gulf production and export facilities will be spared which has allowed natural gas prices to level off. The EIA map below shows the infrastructure and the path of the storm.

EIA gas storage showed an injection of 47Bcf versus the estimates of 52Bcf. Again, really nothing to see here that would drive price action. In the coming weeks we will start to see longer range weather forecasts that might drive some price action.

NOAA WEATHER FORECAST

DAY-AHEAD LMP PRICING & SELECT FUTURES

RTO ATC, PEAK, & OFF-PEAK CALENDAR STRIP

DAILY RTO LOAD PROFILES

COMMODITIES PRICING

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