The WPO returns after a turkey induced food coma. There's some things to get to, so let's get to it!

Virginia PUC Says No Go

Given datacenter/electricity now holds what seems like a nightly slot on the broadcast news, the dinners, cocktail hours, bar outings, and sauna camps over the Thanksgiving weekend, certainly put most of us in a conversation having to opine or listen to the opinions of others on the subject. A couple weeks ago we did a dive into the PJM Market Monitor's 2025 wholesale power prices report, worth the read if you missed it. From the data in the report, we pointed out that the driver of overall prices is still natural gas and maybe not the meteoric pace of data center builds, at least for this year.

This week, really a couple Fridays ago, we got another indication that maybe there is something else contributing to prices moving higher. For years now if some poor sap, while singing the praises of renewable assets, even slightly hinted or mentioned things like capacity factor, the cost, the intermittent nature of generation, the poor sap, would get the stink eye at the very least.

Anyway, a couple weeks ago, an article by Steve Haner, a Senior Fellow for Environment and Energy Policy at the Thomas Jefferson Institute for Public Policy appeared in Bacon's Rebellion which is a information site on a host of topics specific to Virginia. In late November, citing price, the Virginia State Corporation Commission (SCC), which is their PUC equivalent, denied Appalachian Power a request to add battery to their system under the Virginia Clean Economy Act (VCEA) which mandates clean energy with targeted dates. The Commission also weighed in on an out of state 261 MW-wind project Appalachian is undertaking. In this ruling the Commission said it could move forward, but only if the project qualifies for the current tax credits still available. Another issue with these, and other projects, is part of the cost equation includes "social cost of carbon". Put simply, the feasibility of projects rests on an arbitrary number on reducing carbon. One of the Commissioners pointed out that the only way the wind project justified a reasonable cost, was adding in a $260 to $300 million of avoided "carbon damage" over its lifetime.

While it's not unprecedented for a PUC to deny a project, it's far from common. More common is disallowing parts of a project, or even more likely the cost recovery timeframe. This will be interesting to watch play out as it moves forward and it's safe to say there will be more than a passing interest in the tax credits associated with the project. In a bit of irony, Virginia is one of the states that has seen significant load growth from data centers. Maybe datacenters are at the middle of all the cost runup, heck, more load needs more generation. We are sticking with "it's a little more complicated than that.".

As an aside, currently Appalachian customers are paying $1.27 per month on 1000 kWh used. Next March that number goes to $5.63 which is the first major increase since the law passed in 2020. For context, an average house uses about 1000 Kilowatts per month so the increase works out to roughly $50 per customer. While $50 per household doesn't seem like a lot, that's just one line item on the customer invoice.

Natural Gas Underground-Stored

As winter descends on us and is driving gas and electric prices higher this week, we tuned into the storage report more than usual just to get the reaction. The number are the numbers, but it got us thinking about storage and down the rabbit hole we went. This is all in fun, the serious stuff is covered by our gas guys, so no offense if you skip or skipped to the real news.

Since the advent of fracking in the US, oil and natural gas production has skyrocketed, doubling today from the mid 2000s. No question production is a function of demand, but looking at the EIA storage numbers every week got us wondering how much storage has increased? First, it's worth examining and understanding how we store gas in the US underground, Basically there are three forms of storage used; depleted gas or oil fields, salt caverns, and aquifers. Like we said, there is a rabbit hole to go down with terms like cushion gas, deliverability, injection capacity, but we are going to skip all that and just show a chart and a map. Pretty interesting that storage hasn't grown nearly at the pace of production and even more interesting to see the map of storage.

Natural Gas Market Commentary

provided by

Panic appears to be setting in for the natural gas futures market. With the latest cold snap now looking to linger over the Midwest and East deep into December, the January 2026 NYMEX futures contract is gaining momentum above $5.00 per MMBtu. This is the first time a prompt-month NYMEX contract has traded with a $5 handle since December 2022, and that was when prices were heading in the other direction, coming down from the multi-decade highs traded earlier that year. However, the headlines you’ll see in the Dow Jones Newswire that says, “Natural Gas Prices Hit New Three-Year Highs” (or something to that effect) are a bit misleading. When looking at the individual contracts currently on the board, the price levels aren’t quite as shocking. January 2026 is currently trading above $5.40 per MMBtu, which is in line with where that contract was last priced in March. The balance-of-Winter 2025-26 strip, which is weighed down by the discounted March 2026 contract, is just below $4.90 per MMBtu on average, and still hasn’t breached its highs traded in June.

I give those stats not to downplay the significance of this rally – market sentiment is extremely bullish right now – but just to give important context to these price levels.

The driver behind the recent price action is all weather related. We’re seeing population-weighted heating degree day totals this week that rival levels normally reserved for mid-January. Combined residential and commercial demand has already reached heights above 60 Bcf per day – a benchmark normally reserved for a handful of the coldest days of a season and first recoded last winter on January 9. All of this adds up to an especially early period of intense cold that has the market pricing in the growing possibility of an overall historically cold season. The scariest analog season that keeps getting referenced is Winter 2013-14. That was the coldest winter in recent memory and saw storage inventories drawn down below 1 Tcf, creating real fears of shortages late in the season, leading to extreme volatility and $6+ NYMEX pricing at times during the first quarter.

Storage inventories that winter were drawn down by more than 3 Tcf – from just above 3.8 Tcf in the fall to around 800 Bcf at the bottom. While no outlets are currently anticipating such a dramatic drawdown during the upcoming season, the market is no better equipped to handle an entire winter of extreme cold than it was 12 years ago. Sure, production has nearly doubled, but we’ve also seen the LNG export industry grow to around 20 Bcf per day (nearly 20% of current U.S. output) and baseload power generation demand increase dramatically. Meanwhile, we’ve added virtually no new storage capacity. Inventories heading into this winter are only in slightly better shape than they were at this point in 2013. A 3-Tcf seasonal drawdown is far from likely, but it isn’t totally off the table either, and that possibility is what is driving market sentiment.

All of this to say is that there is still obviously a long way to go this winter, and we are a far cry from being able to say that we’re in store for a repeat of the 2013-14 season. However, the recent panic goes to show that even with record production and heathy inventories, this is a vulnerable market, and traders are quick to build in extreme risk when the entirety of the season is still in the forefront.

It’s going to be an interesting winter.

Cocktail Corner

Having read the Bacon's Rebellion webpage more than a few times, it was time to do some digging. Aside from the founders last name being Bacon, the "rebellion" part comes from a colonial uprising in Virginia in 1676. There are some open interpretations on what happened, quoting the National Park Service, "Bacon's Rebellion was probably one of the most confusing yet intriguing chapters in Jamestown's history". Basically, it was a fight over tobacco taxes and which Native American tribes to side with in skirmishes. Nathanial Bacon served in the Governors Council lead by Governor Sir William Berkeley, a favorite of the King. When Bacon disagreed with a few rulings, he and some colonists started skirmishes that lasted a year ending with them burning the Capital in the colony of Jamestown. The Crown sent troops to settle the colonists down, but by the time they arrived, the dispute had been settled. Some call it the original Revolutionary War.

This weekend at the Holiday Party when talk of politics heats up the atmosphere, settle everyone down with the story of Bacon's Rebellion.