Smartest Insight | Issue 103

Our weekly company round-up covers the key market and industry news in one place, so you don’t have to look any further to stay ahead.

January 19, 2023

Market Update:

On 1/12/2023 the EIA released a historic storage report, the first ever January injection. For the 1/19/2023 report things are expected to return to a draw albeit half the five-year-average, 75 Bcf. A 75 Bcf draw would put us at a 40+ Bcf surplus to the fiveyear-average. Prompt gas has had a ping pong feel over the last few trading sessions, dropping $0.27/MMBtu on Friday only to gain $0.27 on Tuesday. The February contract is off $0.27 again today and the story is weather, weather, weather. With January likely settling as a top-5 all-time warm month in PJM and NY the market moved concerns onto the start of February. On Tuesday it looked as though the 11-15 day portion of the forecast would drop significant cold onto the majority of the lower 48. Those fears have subsided yesterday as mid-day model runs have moderated for the 11-15 day. With the move lower eastern PJM and eastern NY market heat rates are now sitting at 12-month lows for the front calendar strip.

PJM and Eastern NY Market Heat Rates

Freeport LNG Status:

On January 11, 2023, Reuters reported that, according to its sources, Freeport LNG is expected to further extend the outage of its LNG export project until February. Freeport’s last official communication was on December 23 when it said that it expected to restart in the second half of January 2023. Both the Federal Energy Regulatory

Commission (“FERC”) and the Department of Transportation's Pipeline and Hazardous Materials Safety Administration (“PHMSA”) need to provide approval before Freeport can restart. Freeport’s 2 BCf/d export project has been out of service since June 8, when an explosion occurred at the facility. Freeport’s delay in restarting has kept significant volumes of natural gas from being exported from the U.S.

NRG Sells Land To Beacon Wind:

NRG Energy has finalized the sale of land near its Astoria power plant in Queens, New York to Beacon Wind. Beacon, a 1230MW offshore wind project being developed by BP and Equinor, will use the site to interconnect its offshore wind project to the grid.  NRG previously filed an application with the New York State Department of Environmental Conservation (“NYSDEC”) to replace its Astoria generation plant with a new, 437-MW simplecycle peaking generator. However, NYSDEC denied NRG’s application because it was at odds with New York’s clean energy law.

PJM December Price Spike Event:

At its January 11, 2023 Market Implementation Committee meeting, PJM provided information to stakeholders about the December 23-24 2022 price spike event. PJM said that the temperature drop between December 23 and December 24 was the most drastic in a decade. PJM had forecasted peak load for December 23 at 127 GW, but the actual peak was 135GW. In addition, 34.5GW of generation was forced out of service on December 23 and 46 GW (23% of PJM’s total generation) was forced out on December 24. The main causes of generation outages were equipment failure and lack of fuel supply. PJM noted that Appalachia region gas production dropped by 30% during the cold snap, which was a major contributor to gas generator outages. As a result, PJM real time on-peak power prices averaged over $1100/MWh on December 23 and rose to a peak of more than $4,200/MWh on December 24. PJM has assessed penalties to the non-performing generators totaling between $1-2 billion. Those penalties will accrue to generators and demand response providers that performed during the event.

ISO-NE Proposes New Capacity Market Rules:

On January 12, 2023, ISO-NE reviewed with stakeholder its proposal to revise the capacity accreditation rules for the capacity market.  A key element  of the proposal is a new rule to  derate the winter capacity volume that a gas fired generator can sell into the capacity market for generators without firm natural gas contracts. The proposed rule would impact generators that are subject to regional gas pipeline and LNG supply constraints during the DecemberFebruary period and would certainly raise winter capacity prices.  The New England region has experienced natural gas supply shortages during winter for many years due to lack of pipeline capacity. ISO-NE plans to file revised tariffs with the Federal Energy Regulatory Commission (“FERC”) by the end of 2023.