Posted: July 10, 2026, 11:58 am

Hot One

A couple weeks ago we commented on summer had finally arrived. As it turns out, that was nothing more than a dress rehearsal for what came last week. As temps climbed into the triple digits, and stayed there, the ISOs in the Midwest and Northeast were stretched. PJM issued multiple alerts and even went as far as a Max Gen Emergency which calls on generation and demand response plans to control the load. The ISO would have set an all time record for demand on the evening of July 2 had it not been for demand-response shutting down load.

We often talk about capacity markets on these pages as prices have risen in the auction markets the last couple years in MISO and PJM. As a refresher, the capacity market is known as the reliability pricing and is procured through auctions. While MISO and PJM have slightly different programs, the basic premise is ensuring grid reliability by paying power plants and demand-response programs to guarantee electricity will be available during future peak demand periods. In other words, if electricity demand is too high, generators will produce or load can be shed. Last week saw the above message for two zones in PJM. Essentially this was PJM calling in their chits and saying it’s time to perform for all the money we’ve paid you. In a performance assessment event during a capacity emergency the generation asset or demand-response either performs or faces big fines. Ultimately, according to PJM, they did not actually run a performance assessment, although there is still some confusion amongst some press. Regardless, last week was a good insight into the reason for the capacity market.

EIA- Electricity Prices Are Falling

This week EIA released their latest version of the Short Term Energy Outlook. Interestingly enough, because of natural gas pricing and production, they are lowering their forecast for whole sale electricity prices for the summer over last year. The irony of the release was the forecast complete day of July 1 which was a day before the explosion of pricing shown below. The chart isn’t the easiest to read, but on the aggregate, the forecast is for $45/MWh which is $4/MWh below last year. Some of the big moves are in the Southwest, Northwest, and MISO. To be fair, the report did contain some sort of heat wave disclosure that could throw the forecast off.

Natural Gas Market Commentary

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After trading in a sideways range for more than a month, the natural gas futures market is now breaking out to the downside, as traders begin discounting summer risk amid loosening near-term fundamentals. Benchmark pricing had been bouncing around in a roughly 10% range above $3.00 per MMBtu since late May. However, as news circulated yesterday morning about extended maintenance at Freeport LNG that looks set to reduce feedgas by more than 1 Bcf per day through August, prices began moving toward the bottom end of the range. From there, a bearish storage report helped solidify the shift in market sentiment and ultimately break through support around the $3.00 level.

The 61-Bcf build announced for the week ended July 3 was noteworthy because it covered the major heat that moved across the Midwest and East. With most fundamental models calling for a smaller build, the data implies that natural gas demand from power generators came in weaker than expected during the surge in air-conditioning load. Strong wind generation in ERCOT and MISO muted the need for gas-fired power, even during some of the hottest weather in years across several key markets.

With the storage surplus expanding during a major hot-weather event and LNG export demand set to be reduced for the remainder of peak summer, market participants have reassessed seasonal risks and are bracing for the possibility of full storage ahead of winter. Balance-of-summer contracts as of Friday morning are trading firmly below $3.00, while Winter 2026-27 is pushing fresh multi-year lows south of $3.60 per MMBtu. A bout of extended major heat showing up in the forecast could certainly inject bullishness back into the market, but for now, the path of least resistance appears to be to the downside.