US Power Market Update - 23 Feb. 2022

Market Commentary

The natural gas storage report for the week ending 2/11 indicated a withdrawal of 190 Bcf. This draw came in below expectations, as well as last year's mark, yet significantly exceeded the benchmark for the 5-year average for the week.

While spot power prices were on the decline this past week, futures saw an opportunity to climb. Summer strip positions were up in every region this week, most notably in ERCOT and PJM, where futures jumped 10%. ERCOT saw the heaviest near-term upward movement of any territory this week, rising 15% for the balance of CY2022, and 11% for the winter of '22/'23. Looking a bit farther out, futures positions gained roughly 5% for 2023-2025
in most ISOs.

With winter unwilling to call it quits, the near-term power market positions continue to carry a premium. For end-users on the fence about going long- or short-term for hedging, your organization's budget sensitivity should weigh heavily in any decisions. Customers that are unable to stomach the sticker shock with short-term hedges will find a bit of budgetary relief through longer terms, thanks to the backwardation in the markets. For organizations with the option of holding off on the long-term buy, a moderate range of spring weather would likely deliver the shoulder season pricing favorability that a wait-and-see approach would be based upon.

Regional LMP Movement

LMPs weakened in each territory once again, dipping over 12%, week-over-week, in NY, PJM, and California. Larger declines were seen in New England and ERCOT, with spot rates falling 18% and 25% respectively.

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