US Power Market Update - 27 Apr. 2022

Market Commentary

The natural gas storage report for the week ending 4/15 indicated an injection of 53 Bcf. This draw was a bit above expectations, and also eclipsed last year's total for this week, as well as the 5-year average for this week.

Power market futures gave back some ground this week, correcting a portion of last week's major spikes. The summer strip, as well as the balance of CY2022, ranged from marginal decreases of 2% in NY and New England, to 6% and 11% dips in California and ERCOT, respectively. The forthcoming winter strip saw very similar drops. ERCOT led the way in outer year reductions, dropping 8% in 2023 and 4% in 2024, while the other territories fell mostly in the 2-3% reduction range for 2023 through 2025.

Power market positions remain bloated in the near-term, with significant relief to be found in 2024, 2025, and even into 2026. In New England, for example, 2025 is trading at a 33% discount to 2023, with 2026 offering similar upside. A very budget-conscious end-user with little tolerance for forward risk can mitigate year-over-year increases by extending into 2025 or 2026. Waiting for market correction may eventually pay dividends, however there is still risk of additional upward escalation if bullish summer weather emerges.

Regional LMP Movement

NYISO and PJM saw the most significant weekly LMP movement, with averages up 11% in both regions. New England and ERCOT saw minimal week-over-week rises in the 2% range, while CAISO gave back 2% vs. the prior week.

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