Midcontinent Independent System Operator day-ahead on-peak locational marginal prices were mostly higher in May, compared with this April and May 2017, boosted by rising demand and early summer heat in the footprint.
At the five hubs in the MISO footprint tracked in an S&P Global Platts monthly analysis, day-ahead on-peak LMP averages ranged between the low $30s/MWh and the high $40s/MWh in May, representing a jump of between 8% and 36% on the month, while prices at four out of five hubs rose between 10% and 19% on the year. Only at the Texas Hub were May's prices down from May 2017. MISO data showed daily peakload averaged 89 GW/d in May, hitting as high as 111 GW near the end of the month. May's average was up about 19% from April and 14% from May 2017.
The surging demand was mostly attributed to much higher cooling loads amid above-normal temperatures in the area.
May is a season-changing month for the geographically diverse MISO, which stretches from Canada to the Gulf Coast. Most of the electric load shifts from heating to cooling in May, as heating degree days fell significantly in the month, which cooling degree days more than offset.
S&P Global Platts Analytics data shows that CDDs for the entire footprint were estimated to total 139 in May, compared to seasonal norms of less than seven and the total of less than one in April.
In contrast, HDDs totaled about 65 in May, about half of the seasonal norms and less than 10% of the April total.
On the year, May's CDDs total represented a rise of over 300% from the year-ago level while this May's HDDs were less than 30% of what it was in May 2017. Average temperatures across MISO were estimated at 67 degrees in May, about 10% above normal and 60% above the average in April.
The grid operator issued several hot weather and conservation operation alerts in mid-May and late May, asking market participants to take action on the possible tight supply situations, such as calling for suspension or deferral of generation and transmission maintenance outages.
Bucking the trend, next-day prices at Texas Hub were down about 7% on the year to average in the high $30s/MWh in May, likely due to weaker spot gas prices on the year.
Spot gas prices at Houston Ship Channel, a representative regional gas trading point for Texas Hub, averaged about $2.814/MMBtu in May, down about 43 cents, or 13% from what it averaged in May 2017, according to Platts data. This May's average was down less than 2 cents from the April average.
FORWARDS DIP ON HIGHER RESERVE MARGIN
Looking ahead, MISO forward prices for the upcoming summer were lower on the year with little change from April, as higher generation reserves and lower natural gas prices were expected.
Texas Hub July on-peak price averaged slightly below $38/MWh in May, flat to the level in April, but about 8% below where it traded a year ago, according to Platts data.
The grid operator expected its net internal demand to decrease about 1% from last summer to about 119 GW this summer, while its prospective generation resources were expected to decrease about 0.7% to 142 GW over the same time.
As a result, MISO's prospective reserve margin, the percentage difference between prospective resources and net internal demand, was expected to rise to 20.1% from 19.7% this year, about 3 percentage points higher than the reference or target margin level.
The falling demand was mostly caused by an increase of about 17% in available demand response resources, rising to 6 GW from 5.1 GW over the year.
"MISO also studies the summer system reliability during a high outage, high load scenario. For these conditions, MISO expects to rely heavily on demand response," the North American Electric Reliability Corp. said in its latest summer outlook report.
Additionally, Houston Ship Channel July gas forwards averaged about $2.919/MMBtu in May, about 2% below where the actual spot prices came in last July.
The latest forecast from US National Weather Service called for enhanced chances of above-normal temperatures in most of MISO South region and near-normal temperatures in its Central and North region from June through August. -- Jeff Zhou
