Insane Flash Crash In Utilities Stocks

Future prices to reserve generating capacity at power plants in 13 Eastern and Midwestern states including Illinois fell by more than half, confounding industry observers.

Crane testing Exelon investors' patience

“That optimistic theory propped up Exelon shares until this week, when a closely watched electricity market auction blew a gaping hole in Mr. Crane's hypothesis. Future prices to reserve generating capacity at power plants in 13 Eastern and Midwestern states including Illinois fell by more than half, confounding industry observers. The auction portends a significant revenue hit for Exelon after June 1, 2016.

More troubling, the auction signaled power prices aren't likely to recover anytime soon. It also confirmed that the economic recovery still hasn't recharged power demand. Conservation measures and energy-efficient appliances are restraining the growth of electricity use by consumers and businesses.

Exelon stock fell 7 percent on the news, extending a month-long decline that has wiped out three-quarters of a 27 percent rise from January through April.

Along with the stock tumble came signs that Wall Street is losing faith in Mr. Crane's theory that power prices will rise as new regulatory burdens put coal-fired plants out of business. Experts say a surge in bids from gas-plant operators drove down the auction price, indicating abundant power from those plants will fill any supply gap caused by coal-plant closings. As my colleague Steve Daniels wrote recently, developers keep building new gas-fired plants despite low electricity prices.”

So what is going on here? I see prolonged weakness in the whole group. FirstEntergy and Exelon is down 8% today. A weak quarter or surprise is now going to hammer any utility stock price...

Just, extreme pressure to reduce whole sale electric prices...

I think the financial community globally is beginning to balk at purchasing utility stocks?

Why There Was An Insane Flash Crash In Utilities Stocks At The Opening Bell

May 23

When markets opening in New York City this morning, shares of American Electric Power and Nextera Energy, two big electric utilities trading on the NYSE, took a complete nosedive. 

American Power briefly plunged 54%, and Nextera Energy plunged 62% — the question is why. 

To figure out what caused this crash, Business Insiderreached out to Eric Hunsader, founder of Nanex, a research firm that compiles and analyzes market data. 

First thing's first, it's important to realize that this morning was the morning after a Fed announcement. Hunsader said that since utility stocks are impacted by moves in interest rates, it's likely that traders were repositioning themselves based on Bernanke's comments. 

The problem is that as they were all rushing to sell, there weren't enough buyers.

"It just so happened that this morning there was no liquidity and that sector just got killed," said Hunsader. 

Now the question, then, is why hasn't this happened before?

Say it ain't so!  

Exelon, FirstEnergy, NRG Hit By Natgas FearsTue, May 28 2013 00:00:00 E00_WEB

By Bloomberg News, iShares

Posted 02:23 PM ET 

Exelon Corp. (EXC), the largest U.S. operator of nuclear reactors, and FirstEnergy Corp. (FE) fell the most in more than three years after a surge of proposed new plants in the nation's largest wholesale power market caused forward prices to drop.

Exelon, based in Chicago, declined 7.2 percent to 32.14 at 1:37 p.m. in New York, after earlier falling as low as 31.92 for the company's biggest intraday drop since May 6, 2010. FirstEnergy, based in Akron, Ohio, dropped 7.6 percent to $39.42. Earlier it fell to 39.32, its worst one-day decline in four years. NRG Energy Inc. (NRG), based in Princeton, N.J., fell 4.6 percent to $25.92.

The companies, which stood to gain from coal plant retirements, are facing more competition from planned natural gas-fueled facilities and imports from neighboring markets. PJM Interconnection, which oversees power markets in 13 states, said on May 24 that capacity market prices fell 56 percent for delivery from June 2016 to May 2017 from last year's auction. Capacity payments are made to generators to assure a sufficient supply of power.

"It is becoming increasingly clear that significant new low-cost generation and imports are likely to enter the market over the medium term and may be a substantial offset to the positive impact on power prices from coal plant retirements," Deutsche Bank AG's Jonathan Arnold and Keith Stanley wrote in a research note today to clients.

"This essentially risks keeping the market oversupplied with future power price improvement more dependent on a rise in natural gas prices," they wrote.