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November 16, 2022
NYMEX gas is trading lower today on warming weather trends particularly in the 6-15 timeframe but that has not translated to northeast gas basis which is higher on the day for the balance of winter on little news flow as European prices are lower on the day. Consensus estimates for the upcoming storage report are for an injection in the 60-65 Bcf range which would further reduce the deficit to the five-year average. WSI has released their latest seasonal forecast for the Dec-Mar timeframe. The main takeaway from this is that the source cold in Alaska/Western Canada will remain for the balance of winter and that volatility will likely follow it. It will be a matter of how far down into the lower 48 and for how long the cold extends as we are likely to experience more of what we have thus far in November.
New York Planning Offshore Wind Transmission
On November 17, 2022, the NYISO submitted 17 transmission proposals needed to bolster Long Island’s transmission system to the
New York Public Service Commission (“NYPSC”) as a part of the annual public policy transmission planning cycle. Earlier this year, the NYISO completed an assessment of the
Long Island grids’ ability to accept electricity from new offshore wind projects currently being developed. NYISO’s assessment concluded that significant transmission reinforcements are needed on Long Island before offshore wind generation is completed. New York’s public policy transmission process will culminate with an NYPSC order approving one or more of these proposals.Once approved and constructed, the NYISO will collect the annual revenue requirements associated with approved projects from retail electricity suppliers, who will ultimately pass the charges onto customers. Effective January 1, 2023, NYISO will be collecting nearly than $600 million per year in transmission costs, a figure that is expected to double by 2030.
EIA Reports More Coal Plant Retirements
On November 7, 2022, the U.S. Energy Information Administration (“EIA”) posted an article reporting that 23% of the 200,568 MW coal fired generation currently operating in the U.S. are planning to retire by 2029. Power plant owners and operators report planned retirements and additions to EIA in its’ annual and monthly electric generator surveys. EIA cited competition from natural gas and wastewater discharge regulations that will become effective in 2028 as the primary reasons for the retirements. According to EIA, coal retirements averaged 9450MW per year between 2012-2021 and will rise to 11,778MW in 2022. Coal retirements signal the diminishing value of fuel switching in the U.S. electricity markets. The ability to switch to coal generation has been a valuable option to limit natural gas and power price spikes during peak periods. All else being equal, the loss of that fuel switching option will bring higher volatility and higher natural gas and power prices.
More Deadlocks Coming to FERC?
Federal Energy Regulatory Commission (“FERC”) chairman Richard Glick’s term expires at the end of 2022. If Glick is not confirmed by the senate before then, he would need to step down from the commission. If Glick resigns, it will leave 2 Republicans and 2 Democrats as commissioners, which could create impasses at FERC until a 5th commissioner is confirmed. A deadlocked FERC could certainly create uncertainty for new natural gas infrastructure projects. The last time FERC was deadlocked 2-2, a number of proposals became effective by operation of law because the commissioners couldn’t come to agreement.
Freeport LNG’s Return Date Uncertainty
As of November 14, 2022, Freeport LNG has yet to submit a request to the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (“PHMSA”) to resume operations, making it unlikely that it will return to service in November as it previously stated. Freeport has not issued any statements on the matter, except to say that rumors of cracked pipes at the export facility were false. Freeport’s return date will have a material impact on the natural gas and power markets given it exports 2.1 BCf/d when fully operational.