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The September wholesale natural gas contract rose past $4 Tuesday, but settled just under that psychologically important level as wholesale contracts found some support from hot weather forecasts in the 11-15 day time frame continuing in the Midwest and Northeast, just when we thought they were out of the woods in terms of above normal temperatures in this geographic area. Texas will continue to be near record breaking heat for the foreseeable future and Houston is getting close to 13 straight days of above daily 100 degree temperatures in a row close to breaking the current record. Yesterday, the September wholesale contract for September delivery settled up 5.9 cents, or 1.5%, to $3.994 a million British thermal units on the New York Mercantile Exchange. The contract traded as low as $3.88/MMBtu in the morning but then the Federal Reserve came out and indicated that they would keep interest rates low, the financial markets then rallied on the news and the natural gas didn’t want to be the only market left unsettled from the previous day’s settlement and decided to rally as well. Tomorrow’s EIA storage injection estimates are currently clustered in the low- to mid-30s, with the Bloomberg median survey at 35 bcf injection which is just below last year’s 37 bcf figure for the same week.
In the lone star state this morning, the local paper is reporting that high temperatures were the driving force behind record power demand in Texas last week, but what really pushed the state electric grid to the brink of crisis was the large number of power plants that went offline because of unscheduled repairs. As much as 5,000 megawatts of power-generation capacity which is more than 7 percent of Texas' electric output were off-line because of equipment problems last Thursday, when the state's high voltage grid manager, the Electric Reliability Council of Texas, came close to calling for rolling blackouts. It would have been the second time this year and only the fourth time in 21 years for the Texas grid to take such measures. Between 3,000 megawatts and 4,800 megawatts of capacity were offline for unplanned outages on other days last week. But this year alone, there was a June 27 power emergency and rolling blackouts Feb. 2 that were caused by dozens of plant outages following several days of subfreezing weather. These incidents have brought increased scrutiny of plant maintenance. ERCOT doesn't reveal details of power plant operations for 60 days because companies consider such information sensitive to their business. So figuring out which plants are offline and why is difficult to discern. Power plant operators have an incentive to operate during the hours when demand is at its peak since wholesale spot prices can reach as high as $3,001 per megawatt hour, as they did for several hours repeatedly last week. But in theory, a company that owns several power plants could help create power scarcity and drive up prices by choosing to take a plant offline during the peak hours. The company might lose revenue from the plant that's offline but make up for it with the higher prices its other units receive. So there will much more discussion around plant maintenance and what events constitute bringing a power plant down during peak usage in ERCOT as consumer groups will begin to ask questions about reliability and ERCOT”s involvement in operating the electrical grid in Texas.
As various groups negotiate with Exelon’s proposed merger of Constellation, one critic is calling for incentives of $810 million to Maryland ratepayers and other stakeholders as part of the power companies' deal. The proposal by Good Jobs Better Baltimore is more than three times the $250 million incentive package Constellation and Exelon have offered to convince Maryland lawmakers, ratepayers and regulators that the $7.9 billion deal is in the public's interest. The coalition of unions, community organizers and advocacy groups is expected to present its proposal at a meeting Tuesday with Constellation CEO Mayo A. Shattuck III and other executives. James L. Connaughton, Constellation's executive vice president of corporate affairs said the company was confident the regulatory review before the Maryland Public Service Commission would "demonstrate that the merger will be good for our customers, for jobs and for Baltimore."
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