US Power Market Update - 17 Jan. 2022

Market Commentary

The natural gas storage report for the week ending 1/7 indicated a withdrawal of 179 Bcf. This draw came in close to expectations, but eclipsed the benchmarks for last year's coincident week, as well as the 5-year average for the week.

Winter strip power market futures continued its fierce rally this week, with 30+% jumps in ERCOT, NY and PJM for the month of February alone. New England was up an additional 10%. Calendar Year 2022, in turn, saw its largest weekly rise in quite some time for these territories, climbing nearly 10%. Positions through 2025 continue to creep up as well, with ERCOT rising 5% for each of the next 3 calendar year strips.

As expected, the late arrival of winter has brought back some of the volatility we saw this past fall. Cold weather's effects on natural gas will continue to make for a bumpy ride in diagnosing hedging options for power. Locking into long-term positions at the moment is untimely, however some milder weather in February could easily bring some more attractive options.

Regional LMP Movement

LMPs soared in NY and New England this past week, with weekly increases of 127% and 88%, respectively. The cold snap also pushed PJM 34% higher. ERCOT saw minimal change, while California saw spot rates fall off by 14%.

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