NOAA puts the odds of a very strong El Niño this winter above 90 percent. For retailers, the challenge is managing load that runs below-normal on average while still swinging hard around storm-driven price spikes.
El Niño conditions have strengthened rapidly through 2026, and NOAA's Climate Prediction Center now puts the odds of a very strong event this winter above 90 percent, potentially one of the strongest on record. For retailers, that forecast cuts two ways: El Niño winters typically skew milder and drier across the northern tier while bringing wetter, stormier, more volatile conditions to the southern tier. Against a backdrop of already-elevated wholesale prices (reflections of January/February 2026), the practical challenge goes beyond how cold it will get. It is how to manage load that may run below-normal on average while still swinging sharply around storm systems and short-lived cold intrusions, periods when scarcity pricing can still spike even in a warm-leaning season.
Hedge the fixed book, then rethink the variable book
First off, retailers need to follow their internal Risk Policy. For most, that means that Fixed-Price load needs to be hedged near 100% of normal expectations. That leaves the Variable book in question. Given the high likelihood of warm winter anomalies due to the upcoming El Niño, a variable hedging strategy has to adapt to that skewed distribution rather than assume a normal winter. Included in this strategy is the possibility of including potentially unused hedges initially ear-marked for the fixed book. Sizing forward blocks to a climatological "normal" load shape risks leaving the book long and unused if the season runs mild, while a purely index-based posture leaves the retailer exposed on the cold snaps that still occur in El Niño years. The jet stream can still dip south periodically even in a record warm year. A more resilient approach leans on optionality: weather-indexed hedges, swaptions, and shape products that pay out specifically around cold-snap and storm-driven price spikes, paired with a lighter structural block position than a "normal" winter would call for. This keeps premium spend targeted at the actual tail risk rather than paying for volume that likely won't materialize.
Forecast the El Niño, not a normal winter
Load forecasting needs to incorporate ENSO teleconnections directly rather than relying on generic heating-degree-day climatology. Building forecasts around historical El Niño analog years, and running separate models for the milder northern-tier footprint versus the wetter, more volatile southern-tier footprint, gives a meaningfully better starting point than a blended national normal. Because El Niño winters tend to bring more day-to-day temperature whiplash (mild stretches punctuated by storm systems), shortening the re-forecast and re-hedge cycle matters more than usual, so positions can be trued up closer to five to ten days out rather than locked in weeks ahead against a forecast that's likely to keep shifting. General circulation models typically reflect an upcoming cold shot some 10-12 days out. At that point, it is the skill of your trusted meteorologist to determine the true Arctic Blasts from the false alarms. Even with a great meteorologist, there will still be instances where you have to "eat" the extra supply. Just think of it as "an insurance premium". Calling one Arctic Blast correctly will more than make up for calling three incorrectly.
Match customer products to the asymmetry
On the customer and portfolio side, the same asymmetry applies. For larger, more sophisticated retailers, products that let customers capture the benefit of a milder-than-normal season while capping their exposure during isolated cold events or storm-driven price spikes (capped-index or tiered structures rather than flat fixed-price blocks) tend to fit an El Niño winter better, since a flat fixed price sized for a normal winter likely overcharges relative to realized usage. Demand response and peak-day alerts are still worth running, but they should be triggered around specific forecasted price-spike windows rather than assumed across the whole season, since a warm-leaning winter with occasional sharp price events rewards precision over blanket conservation messaging.
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