Mid-Summer Reality Check as Peak Heat Season Approaches

Now that the July 4 barbecues are behind us and we approach summer’s halfway point, it’s worth taking stock at how the season has unfolded. Back in April, POWWR’s outlook called for normal temperatures in Texas, through the northern Plains and into the Ohio Valley, and to the New England Coast, as well as a mild Southeast and heat concentrated west of the Rocky Mountains, driven by neutral La Nina conditions. We were among only a few outlets to make this call while still in Spring, as many forecasts predicted extreme heat across broader regions.

Getting seasonal outlooks right matters significantly for energy buyers. Overestimating heat can lead to excessive hedging costs, while underestimating can leave portfolios exposed to price spikes during actual heat events. These forecasting decisions directly impact margin realization and risk exposure throughout the season.

So far, the season has largely played out as expected, and moderate temperatures have been beneficial for energy buyers. Clients have been earning their hedged margins consistently month after month since May, thanks to conditions that have generally stayed a few degrees on either side of normal without sustained extreme temperatures. The polar vortex that dominated our winter weather patterns continues to influence conditions from its position in far northern Canada and the Arctic, creating the oscillating pattern of cool and warm periods we’ve experienced, like a sine wave moving across the northern latitudes.

However, we’re entering a critical phase. Late July through August is the natural progression toward peak temperatures of the season. This seasonal warming is normal and expected. The challenge comes when heat waves layer on top of these naturally higher baseline temperatures. A heat wave in August carries a compounded impact compared to the same weather pattern in June.

Current weather models show this progression beginning, with heat expanding from the Southwest into Texas and the northern Plains over the coming days. While these patterns don’t show the sustained, extreme heat that would spell trouble for ERCOT, they do signal that peak season conditions are approaching across much of the country.

Strategic approaches for peak season

With this environment in mind, energy buyers should consider a three-layer approach to hedging through peak season:

Seasonal foundation: This base layer was established back in March or April for the May-September period, typically hedging to levels required by internal risk policies or credit supply agreements, often 90-95% of fixed load.

Monthly cleanup: As you enter each new month, adjust for load growth or gaps in your hedging position. If you thought you hedged to 80% but analysis shows it’s only 70%, this is when you close that gap.

Event-specific hedging: When weather models show specific heat events approaching, consider adding extra hedge volume for that week. However, evaluate pricing carefully. Most retail energy companies don’t trade in sufficient volume to access mid-market pricing. You’re typically buying at the wholesaler’s offer price. This reality makes the foundational seasonal and monthly hedging layers even more critical, rather than relying on reactive event hedging when pricing may be less favorable.

During heat events, consider padding your day-ahead schedules beyond your typical load forecast. Instead of scheduling 100 megawatt hours (MWh) for a particular day during a heat wave, bump it to 107 or 110 MWh. This helps minimize volumes that flow to real-time pricing when load forecasting becomes more challenging during extreme weather.

Weather models become less reliable beyond the 10-day mark, so focus your tactical decisions on the nearer-term forecasts while maintaining awareness of longer-term trends. Regular monitoring of 15-day outlooks helps with strategic positioning without overreacting to uncertain long-range predictions.

The value of consistent communication

Peak season success depends less on perfect weather predictions and more on consistent communication with energy partners and the adherence of benchmarked, systematic risk management. Energy buyers benefit most from regular updates that help them understand evolving conditions and make informed decisions within their established frameworks.

As we head into the heart of summer, the foundation is strong for those who’ve maintained disciplined hedging strategies. The key now is staying alert to the progression toward peak temperatures while maintaining the systematic approach that has served well through the first half of the season.