Noting that the natural gas market within the United States appears to be correcting itself, the Electric Power Supply Association (EPSA) said late last month that it believes proscriptive federal policies on the fuel are not necessary.

In a letter to Department of Energy Secretary Spencer Abraham, EPSA President Lynne H. Church said arguments for federal intervention into the currently volatile gas market sound an awful lot like the 1970 arguments that led to the adoption of the Power Plant and Industrial Fuel Use Act of 1978, a law that “cost consumers billions by short-circuiting market forces in favor of federal mandates.” Church noted that Congress recognized its mistake in 1987 and repealed the law.

“The evidence is mounting that the market is already responding,” Church said in the letter. “Rig counts are up, and the future price of gas (as manifested in various commodity exchanges) is moderating.” She noted that Federal Energy Regulatory Commission Chair Pat Wood has said that government intervention in the gas market would be a mistake and specifically cited new, more efficient gas-fired power plants as helping smooth out the supply and demand imbalance.

Quoting the Energy Information Administration (EIA), Church said new gas-fired generation is often dramatically more efficient than existing or retiring gas-fired facilities. She noted that in Texas and in California it has been documented that the development of new gas-fired facilities actually has resulted in less aggregate gas consumption by the electric power industry. EIA recently noted that gas-fired electricity generation increased by 8% in 2002, but total gas used for electric generation increased by only 2%.

“One policy that will save gas TODAY would be the opening of all wholesale power markets to the full force of competition,” she said. “In many parts of the country, state-of-the-art gas-fired power plants sit idle while Korean War vintage gas plants run full bore. The use of economic dispatch — where the least-cost and most efficient power plants are utilized before inefficient units — exists in organized electricity markets in the Mid-Atlantic and the Northeast, but must become national policy.”

She pointed to a recent study that showed that economic dispatch could save Louisiana customers as much as $400 million a year in electricity costs, which would provide “concomitant savings” in natural gas usage.

Church added that EPSA members would “strongly oppose” legislation or regulation that would prohibit gas use in new power plants. “Again, market forces should drive the decisions. This kind of prohibition will not benefit consumers or promote positive national energy policy.”

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