WSI: Late Summer Heat Focused in Drought-Plagued Central US

Slow Transition Toward El Nino Conditions Will Limit Heat in Eastern US

Andover, MA, July 24, 2012 — WSI (Weather Services International) expects August to be slightly cooler-than-normal in the eastern US and in the Pacific coastal cities, with above-normal temperatures elsewhere. The largest positive temperature anomalies are expected in the drought-plagued central Plains. The WSI seasonal outlooks reference a standard 30-year normal (1981-2010).

“This summer has been characterized by extreme heat and drought across much of the central US; and unfortunately, there does not appear to be any immediate end in sight, as we head into August. While the major cities of the eastern US will experience more moderate summer temperatures in August, the Plains and Midwest will continue to suffer through hot, dry weather,” said Dr. Todd Crawford, WSI Chief Meteorologist. “In particular, the MISO and PJM West power regions are at greatest risk for anomalous heat in August. Texas (ERCOT power region) temperatures will likely also be above-normal, but to a much smaller degree than observed in summer 2011. As we head deeper into the fall and El Nino matures, we expect a continuation of above-normal temperatures across the central and western states, with an expanding area of below-normal temperatures in the eastern US by October.”

In August, WSI sees the monthly breakdown as:
Northeast* – Cooler than normal
Southeast* – Cooler than normal
N Central * – Warmer than normal
S Central* – Warmer than normal, except SW TX
Northwest* – Cooler than normal, especially coastal areas
Southwest* – Warmer than normal, except coastal southern California

According to Chris Kostas, Senior Power and Gas Analyst at ESAI, “With cooler-than-normal temperatures expected along the East Coast in August, natural gas prices could see some late-summer price weakness, as gas inventories begin to approach last year’s record level by the end of the month. Usually, below-normal summer loads translate into lower implied market heat-rates. However this year, against the backdrop of very low gas prices and increased coal-to-gas switching, implied market heat-rates could be firm. Coal-fired generators continue to struggle against efficient gas-fired plants and below-normal loads (particularly in PJM, New York and New England). In August, we expect implied market heat-rates will be steady, but firm, due to below-normal cooling load and soft delivered gas prices in those regions. MISO and ERCOT, on the other hand, could see implied market heat-rate volatility, due to the slightly warmer-than-normal temperatures, intermittency of wind resources and continued pressure on marginal coal-fired plants. California power prices are likely to remain relatively soft in August, due to mild temperatures, soft loads and low gas prices.”

In September, WSI forecasts:
Northeast – Cooler than normal
Southeast – Warmer than normal
N Central – Cooler than normal
S Central – Warmer than normal
Northwest – Cooler than normal
Southwest – Cooler than normal

“A mixed forecast is developing for September. While weather-related demand drops off markedly in September, the possibility for warmer-than-normal temperatures in the South could combine with the start of generation maintenance to boost implied market heat rates (particularly if it remains warm late into September). In the Northeast, generation maintenance begins slightly later, so a full generator fleet in early September combined with mild temperatures could help to depress power prices in PJM, New York and New England. Mild temperatures in California also should keep power prices subdued there in September. Gas prices could soften further during the month as inventories approach last year’s record level (i.e. 3,854 Bcf) and begin to approach 4,000 Bcf. While we don’t expect inventories to challenge 4,000 Bcf until October, we do expect gas price softness well before that level,” Kostas added.

In October, WSI forecasts:
Northeast – Cooler than normal
Southeast – Cooler than normal
N Central – Warmer than normal
S Central – Warmer than normal, except southern/central TX
Northwest – Cooler than normal
Southwest – Cooler than normal

“A mixed weather outlook in October may help to depress power prices throughout the country. This is due to the softer delivered gas prices related to the record gas inventories, that we expect. Implied market heat rates will likely be relatively firm in the Northeastern, Southern and Western regions, however, as generator maintenance season is in full swing during this period (taking baseload generators out of service). MISO is expected to be warmer than normal, but the effects of these temperatures will be muted, as seasonal norms don’t generate very much heating or cooling demand during the month,” Kostas noted.

WSI provides customized weather information to energy traders. It will issue its next seasonal outlook on August 21.

*To view the map defining WSI’s US regions, click here.

About WSI
WSI (Weather Services International) is the world's leading provider of weather-driven business solutions for professionals in the energy, aviation and media markets and multiple federal and state government agencies. WSI is a member of The Weather Channel Companies and is headquartered in Andover, Massachusetts with offices in Birmingham, England. The Weather Channel Companies are owned by a consortium made up of NBC Universal and the private equity firms The Blackstone Group and Bain Capital.

About ESAI
Since its inception in 1984, Energy Security Analysis Inc. (ESAI) has been dedicated to monitoring, analyzing and synthesizing information about world-wide energy markets. Tapping the talents of its senior-level staff, ESAI provides clients with unparalleled insight into where the markets have been and where they are headed. ESAI provides ongoing systematic analysis of energy prices in the oil, natural gas and energy markets. For more information on ESAI services, see www.esai.com.

Contacts:
Linda Maynard
WSI
(978) 983-6715
lmaynard@wsi.com

Tommy Sutro
Energy Security Analysis, Inc.
(781) 245-2036
tsutro@esai.com

Editorial Contact:
Barbara Rudolph
Rudolph Communications, LLC
(781) 229-1811