CPV Retail Blog: October 26, 2023

New Product Offering

CPV Retail is happy to announce the addition of a new product to our product suite – Load Following Block and Index. This variation on the standard block and index product provides additional flexibility for customers by allowing the fixed price to be applied to a percentage of usage and is not limited to a fixed static quantity which may or may not cover the deviations of consumption due to weather or other factors.

PJM Regulatory Review

Additional Agenda Items

  • PJM is requesting an order from the FERC on capacity market reform by the end of December/2023 so that the 2025/2026 BRA can be held in June/2024.
  • Winter Storm Elliott settlement recommendations continue to be reviewed at the FERC with most impacted entities supporting the filing. The legacy of this event continue to reverberate through regulatory bodies as well as market participants who now enter this winter with even more potential for extremes.
  • PJM informed its members that it intends to implement the recommendations of the FERC-NERC Joint Winter Storm Elliott Report.
  • Electric Gas Coordination Senior Task Force continues to meet and discuss various proposals prior to PJM opening voting which will remain open for 2 weeks.
  • The PJM Market Monitor requested a 2-week extension for comments review of PJM’s capacity market filing. If accepted this would allow comments to be on the record if filed by November 17.

Market Drivers

Energy Market Update

  • The November NYMEX contract settles this Friday, and it looks like the market has taken on a more bearish tone given mild weather and continued large storage injections.
  • End-of-season inventories in the US will now surpass 3.8 TCF and could edge closer to 3.9 TCF unless heating demand picks up by November 1. Current inventories exceed last year’s balance by over 300 BCF
  • PJM outages looked to have peaked at over 70,000 MW in this latest maintenance season which has helped keep power prices steady into what has been a very mild Fall.
  • International events have not yet triggered any additional volatility into the market although market participants understand any LNG tanker interruptions could cause serious supply disruptions and send TTF, JKM and Algonquin City-Gate prices dramatically higher.
  • Williams/Transco have received permission by the FERC to start service on 450,000/d of their 800,000/d Regional Energy Access expansion project into service. This expansion will allow more gas to flow from Northeast Marcellus to delivered markets on Transco in Zone 6. (PSEG, South Jersey, BG&E, etc.)
  • With Cove Point Terminal back from its fall maintenance outage US LNG exports have been averaging over 14 BCF/D for the first time as several other terminals await completion.
  • Oil prices rallied sharply into the “continued unrest in the Middle East” situation which does not look to be resolved anytime soon and could create some regional price dislocations given winter is just around the corner.
  • The economics of offshore wind continue to be challenged as New York state says “no” to several entities looking to re-trade pricing terms into previously negotiated PPA’s.
  • While Texas certainly had the lion’s share of this summer’s heat the northeast was spared from any significant heatwaves which had they occurred could have easily pushed gas demand for power generation above 55 BCF/D.
  • Mountain Valley Pipeline expects to be in-service sometime in Q1/2024 after years of delays and a doubling in cost to over $7 billion.

Potpourri Comments

The recent chaos in the Middle East has yet to curtail significant volumes of either oil or gas production but still could wreak havoc in global markets as the calendar transitions into the winter. While stocks of natural gas in Europe and North America are well above seasonal averages, it would not take much of an interruption of LNG tankers to create some serious supply deficiencies and leverage up volatility. Both Canadian and US supply are entering winter at close to all time peaks while North American storage sits about 400 BCF higher than last year. To adequately chew through this much storage while production sits at over 100 BCF/D will require “normal” winter weather which basically means cold because a “normal” winter is cold! However, it has been a while since the US experienced a cold winter for the full 5-month winter strip although with 2024 being a leap year there is now 152 days of potential cold versus 151. Natural gas prices have rallied above the important coal-to-gas switching levels which proved critical this past summer in elevating natural gas demand and thus not breaching 4 TCF in storage. Without sustained cold the market will be forced to balance itself with lower prices and much bigger gas-fired electric generation demand motivated by those lower prices. The circumstances in the Middle East will continue to influence both global prices as well as global volatility leaving much out of the span of control of commercial/industrial buyers in the United States. Close consultation with your CPV Retail Representatives will help clients maneuver through these extremely challenging circumstances. Let us help you develop and implement a procurement strategy today!

Forward Pricing

Renewable Energy