US Power Market Update - 11 Jan. 2022

Market Commentary

The natural gas storage report for the week ending 12/31 indicated a withdrawal of 31 Bcf. This draw came in well below expectations, and also fell significantly short of the benchmarks for last year's coincident week, as well as the 5-year average. With winter finally starting to deliver, the Winter strip power market futures rebounded this week, with NY leading the way at an 11% climb. The summer strip also gained, although a bit more modestly. Calendar Year 2022 was also up across the board, which bled into 2023 as well. The outer years of 2024 and 2025 saw minimal movement.

The onset of significant cold presents potential constraints on natural gas pipelines -- which in turn impacts fuel for natural gas- fired power generation. In preparation for potential extreme weather, the ISOs have begun to issue warnings for potential power conservation requests. Hedge positions for the remainder of winter, as well as for the balance of 2022, have regained some of the ground that was lost during the mild month of December. Continued price volatility can be expected through January, as additional stretches of late-month cold are expected.

Regional LMP Movement

This past week's dose of cold weather brought with it some significant week-over-week LMP movement. New England and PJM both jumping nearly 50%, while NY saw a 65% rise. ERCOT was up 21%, while California saw a moderate pull-back of 8% vs. the prior week.

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