Houston—Midcontinent Independent System Operator wholesale power prices were stronger last month, compared with January 2020, with especially strong prices in the MISO South region, apparently in reaction to cooler weather, heavier demand and higher natural gas prices.
Judging by forward pricing, traders foresee little risk of significantly higher power prices this March, compared with March 2020, despite a 30-plus percentage increase in gas forwards.Day-ahead on-peak locational marginal prices in all five of the geographically dispersed MISO hubs included in this analysis averaged in the mid $20s/MWh this January, but the averages of $24.93/MWh for Louisiana Hub and $25.22/MWh for Texas Hub represented 18.1% and 18.6% increases, respectively, compared with January 2020 LMPs. The others' percentage increases were in the single digits, according to the S&P Global Platts price database.
Month-to-month percentage changes were relatively modest, ranging from a 7.4% decrease at Louisiana Hub to a 5.3% increase at Indiana Hub.
MISO's daily peakloads averaged 83 GW this January, up from 81.7 GW this December and 82.5 GW in January 2020.
But these numbers, in effect, mask big load differences in MISO's large footprint, which extends from Canada to the Gulf of Mexico
"MISO North load declined by 2% year on year whereas MISO Central matched year-ago levels," said Jahnavi Nadipi, a power market analyst at S&P Global Platts Analytics, said. "MISO South load, on the other hand, increased by 4% year on year in January."
Pandemic effectsOne reason for the difference in loads may be how the various regions have responded to the novel coronavirus pandemic.
"MISO North and Central states have extended their state of emergency into February and some states through March," Nadipi said in a Feb. 8 email. "MISO South states have also extended their state of emergency declaration into February but they have looser restrictions on mass gatherings compared to MISO North and Central."
Population-weighted average heating-degree days this January were up 17.1% from this December and up 9.7% from January 2020, according to CustomWeather data. At 23.5 degrees Fahrenheit, the population-weighted average daily low this January was down from this December's 25.3 degrees F and January 2020's 24.1 degrees F.
The North and Central region's large wind fleet and the South region's heavy reliance on natural gas prices could also have contributed to the price separation, Nadipi said.
At the Chicago city-gates, spot gas averaged $2.527/MMBtu this January, up from $2.442/MMBtu this December and $1.921/MMBtu in January 2020, Platts data shows.
At the Henry Hub, spot gas averaged $2.61/MMBtu this January, up from $2.575/MMBtu this December and $2.006/MMBtu in January 2020.
Generation mixWith such natural gas price strength, coal-fired generation expanded its leading share of the MISO's average daily generation mix to almost 42% this January from 38.5% this December and 32% in January 2020, according to MISO data.
In contrast, natural gas' No. 2 position continued to slide to 26.5% this January from 29.2% this December and the leading share of 35.2% in January 2020.
The wind fleet's share was 12.5% this January, down from this December's 13.5% but up from January 2020's 10.6%.
MISO's average daily generation totaled 1,715.5 GWh this January, up from this December's 1,656.3 GWh and January 2020's 1,652.8 GWh.
Forward marketsIn forward markets, March on-peak packages were mixed this January compared with March averages this December, but modestly higher compared with the March 2020 packages' averages in January 2020, despite substantially higher gas forwards.
Indiana Hub March 2021 on-peak power averaged $29.50/MWh this January, down almost 1% from this December's average of $29.80/MWh but up 5.5% from the $27.95/MWh that March 2020 on-peak averaged in January 2020.
Louisiana Hub March 2021 on-peak averaged $27.80/MWh this January, up less than 1% from $27.55/MWh this December and up 5.8% from the $26.30/MWh that March 2020 on-peak averaged in January 2020.
"Gas prices for 2021 have been revised down, keeping the average prices below $3/MMBtu across all Midwestern locations in MISO yet they are expected to increase by an average 48% year on year in 2021," Nadipi said. "This rise in prices is expected to lead to gas-to-coal switching for the majority of 2021 across MISO. Therefore, we are anticipating a 19% year-on-year growth in average monthly coal-fired generation offsetting the losses from gas-fired generation in 2021."
At the Chicago City-gates, March gas averaged $2.543/MMBtu this January, up 4.9% from the $2.425/MMBtu average this December and up 31.2% from the $1.939/MMBtu that March 2020 gas averaged in January 2020.
At the Henry Hub, March gas averaged $2.625/MMBtu this January, up 2.3% from this December's average of $2.567/MMBtu and up almost 30.5% from the $2.012/MMBtu that March 2020 gas averaged in January 2020.
The National Weather Service's forecast for February, March and April, which was issued Jan. 21, indicated elevated chances–33% to 60% -- for above-normal temperatures throughout almost all of the MISO footprint.
