Study Shows Bulk Power Market Grew 15% in '97
Although its seen some rocky times in recent weeks, the
wholesale power market is growing at a rapid pace and continues to
mature, according to a recent study.
Wholesale power sales increased by more than 15% between 1996
and 1997 and now account for 24% of all sales by investor-owned
utilities, according to Metzler Services, a division of Metzler
& Associates. The 1997 operating data for investor-owned
utilities is available now from the Metzler Energy Knowledge System
"Competition is compelling individual utilities to operate more
efficiently and to rationalize investment in new infrastructure,"
said John E. Hanson of Metzler & Associates. "Utilities are
maximizing use of existing assets - getting more capacity from
existing systems - and taking advantage of the capacity built into
the interconnected electric system."
Investor-owned utilities generated about 2.3 billion MWh during
1997 - about the same amount as in 1996. At the same time,
investor-owned utilities' wholesale power sales increased from 670
million MWh in 1996 to 765 MWh in 1997, a 15% increase. Thus,
wholesale power sales by investor-owned utilities now account for
24% of total sales - up from about 22% in 1996.
The growth of the wholesale energy market has a number of
implications including greater asset utilization, enhanced
investment attractiveness, and new generation capacity. More
efficient use of the existing infrastructure and asset base
minimizes the need to invest in new facilities to meet current
demands. Utilities experiencing capacity shortages have acquired
additional energy supplies from other companies. This has limited
the need to build new capacity for now, despite the fact that
capacity margins have consistently been dropping over the past 10
The chance to earn competitive returns from investment in
electric generation is becoming a reality. "There is no longer
regulatory-guaranteed return on investment," said Hanson. "But
industry-wide, we're starting to see capital deployed in energy
generation with the promise of returns that are consistent with the
law of supply and demand."
Joe Fisher, Houston
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