WSI Expects the Focus of US Summer Warmth from the Southwest, across the Great Lakes and into the Northeast

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Transition toward El Nino Conditions and Cooler North Atlantic Suggest Magnitude of Heat to be Reduced, Relative to Last Two Summers

WSI US Weather Outlook May-July 2012

WSI US Weather Outlook May-July 2012

The oncoming El Nino event suggests that the warmest part of the summer is more likely to be early, with generally cooler temperatures later in the summer.

WSI (Weather Services International) expects the upcoming period (May-July) to be cooler than normal across parts of the western US, the Southeast and in the major cities along the Pacific Coast. Generally above-normal temperatures are expected in other regions, especially across the north-central and Great Lakes states, including the MISO power region. The WSI seasonal outlooks reference a standard 30-year normal (1981-2010).

“April has been another in a long string of unusually warm months over most of the eastern two-thirds of the US. However, as we head toward a new El Nino event, we are expecting increasing chances of below-normal temperatures in, at least, parts of the US. For May, we are expecting increasing chances of below-normal temperatures in the central US, while the eastern US remains warmer than normal. Looking beyond May, we are expecting a much different type of pattern than what was observed during the last four summers,” said WSI Chief Meteorologist Dr. Todd Crawford. “The combination of an emerging El Nino event, expectations for relatively muted levels of atmospheric blocking and cooler North Atlantic ocean temperatures, all suggest a milder summer, especially in those areas of the southern US that have been plagued by hot summers in recent years. We are predicting that the year-over-year change in summer temperatures will be particularly noticeable in the Texas-based ERCOT power region, which suffered through a brutally hot and dry summer last year. We expect the warmest summer temperatures, relative to normal, to be found across parts of the north-central US this summer. Finally, the oncoming El Nino event suggests that the warmest part of the summer is more likely to be early, with generally cooler temperatures later in the summer.”

In May, WSI sees the monthly breakdown as:
Northeast* – Warmer than normal
Southeast*– Warmer than normal
N Central *    – Cooler than normal, except ND/MN
S Central*     – Cooler than normal
Northwest*    – Cooler than normal
Southwest*– Warmer than normal, except coastal southern California

According to Chris Kostas, Senior Power and Gas Analyst at ESAI, “While U.S. power prices in May are likely to be relatively low from a historic perspective -- due to extraordinarily low gas prices -- volatility is likely to be higher than normal (particularly east of the Mississippi), as warmer-than-normal temperatures and higher-than-normal electrical loads coincide with the end of the generation maintenance season. Even though gas demand from the power sector is likely to run higher than normal, due to coal-to-gas switching, the extraordinarily mild winter has left natural gas inventories well above (i.e. 871 Bcf) last year’s level at this time. As a result, natural gas demand for storage injections this year will be much lower and will offset much of the increased demand from coal-to-gas switching this summer. Reduced storage injections and higher production rates should keep gas prices low this summer. Power prices along the West Coast will likely be very subdued as cooler-than-normal temperatures limit early summer air conditioning demand. Texas could also see subdued power prices associated with cooler-than-normal temperatures in May.”

In June, WSI forecasts:
Northeast     – Warmer than normal
Southeast     – Cooler than normal
N Central     – Warmer than normal
S Central     – Warmer than normal
Northwest     – Cooler than normal
Southwest – Warmer than normal, except CA/NV

“Warmer-than-normal June temperatures in Midwest ISO (MISO) and western PJM could create a volatile situation for power prices in those regions as summer demand begins to kick in and drive afternoon cooling loads higher. Low gas prices, overnight wind generation and low off-peak power prices driven by efficient gas plants could reduce coal-fired generation in the Midwest and Northern Illinois regions. Lower coal-fired generation would create short periods of very high prices, depending on the duration of the heat. The same effect is likely to be seen in Texas, though the extent of the warmer-than-normal temperatures is expected to be lower there. New York and New England depend far less on coal-fired generation and should be affected to an even lesser extent. California, the Northwest and the Southeast will likely experience soft power pricing in June due to cooler-than-normal temperatures expected in those regions,” Kostas noted.

In July, WSI forecasts:
Northeast     – Warmer than normal
Southeast     – Cooler than normal
N Central     – Warmer than normal
S Central     – Cooler than normal
Northwest     – Cooler than normal
Southwest – Warmer than normal, except CA/NV

“Mild July temperatures along the West Coast and in the South (extending to Texas) combined with the soft gas prices that we expect should keep power prices subdued in those regions. Coal-fired generators could find it difficult competing against gas-fired generators during the milder periods. While the slightly warmer-than-normal July temperatures expected in MISO, mid-Atlantic-states-based PJM and the Northeast will support electrical loads in those regions, the absence of significant heat could continue to pressure coal plants to reduce output. Power prices could be soft in general, but very volatile during brief warm periods. Implied market heat-rates are expected to be very high throughout the summer, due to continued pressure on coal plants and coal-to-gas switching. While increased shale gas production has been beneficial in keeping power and gas prices subdued, the extraordinarily mild winter and the record inventory levels available at the beginning of this summer have accelerated the economic pressure on coal-fired plants and will likely increase power price volatility this summer,” Kostas added.

WSI provides customized weather information to energy traders. It will issue its next seasonal outlook, including the final update for summer, on May 22.

*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. More information about WSI can be found at http://www.wsi.com.

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 http://www.esai.com.

Contacts:
Linda Maynard    
WSI
(978) 983-6715    
lmaynar(at)wsi(dot)com
Tommy Sutro
Energy Security Analysis, Inc.
(781) 245-2036
tsutro(at)esai(dot)com

Editorial Contact:
Barbara Rudolph    
Rudolph Communications, LLC
(781) 229-1811
bj(at)rudolphcommunications(dot)com

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