Rising temperatures again will mean growing tightness in powermarkets across the country this summer. While industry players havemore experience dealing with shortages and constraints, a trulyefficient market with ample power supply depends upon regulators,according to industry executives.

Dynegy President Stephen W. Bergstrom has strong opinions aboutCalifornia, its need for more generation, and why there isreluctance by industry to step up and provide it. He expects thestate to be about 10,000 MW short this summer. “We ran more in thefirst quarter of this year with our [California] generation thanwe’ve run all last year in the wintertime. So we’re starting to seesome signs of demand growth out there and no new plants being builtas well.

“We’ve been telling the regulators in California for three yearsthat if you continue to hold price caps in California, people willnot build new plants out there, and you’re going to be short. Well,guess what. Now we’re getting calls from the governor and callsfrom the legislative guys in California saying, ‘Come out and talkto us. We’re really concerned about this short market in Californiathat we’re starting to see.'”

For the rest of the country, excluding the New England states,where so many generation projects are planned or under way that themarket will be — at least theoretically — long on generation,the power market by 2003 will be 60,000 MW short of peakingcapacity, Bergstrom said. That prediction assumes all the announcedplants outside of New England get built, no coal/nuclear plantshut-downs for four years, 3% annual demand growth and 15% reservemargin.

“Even if we’re off by 50% and it’s 30,000 MW instead of 60,000MW, it’s a significant number,” Bergstrom told attendees at theZiff Energy Group’s North American Gas Strategies Conference inHouston last week. “At 5% demand growth that’s 35,000 MW of newplant that needs to be built every year just to keep up withdemand, let alone make up for some of the shortfall for no plantsbeing built in the last three years.”

Dynegy plans to install 1,000 MW of generation this year andanother 1,600 to 1,800 MW next year. “So it takes 35 Dynegys, ifyou will, doing what we do, just to keep up with demand growth at a5% demand growth rate. So this is not something that can be easilysolved in a year or two. These are plants that take two to threeyears to build and develop, even if you get permits, so it’s asignificant issue.”

For this year the North American Electric Reliability Council’s(NERC) summer assessment still is in the works, and the season’sweather remains to be seen. But the market “In each of the last twoyears, the load versus capacity situation in ECAR was tight butmanageable, and that’s what we’re expecting again in 2000,” saidBrantley H. Eldridge, executive manager East Central AreaReliability Coordination Agreement. “Basically, at time of peakwe’re expecting the situation to be tight again in ECAR.” Over thelast couple of years, the peak reserve margin in ECAR has gottendown to around 10 or 11% when previously it was around 15%.

The Mid-America Interconnected Network (MAIN) expects to haveanother 2,900 MW of generation available this summer due to newplants and facility upgrades, said spokeswoman Jackie Olson.”Overall, we expect improved reliability over the next couple ofyears.” All of the region’s nuclear plants are expected to be online this summer. “We’ve been able to meet the peak demand over thelast several summers. [Some customers] have had to employ somedemand-side management efforts, but we’ve been able to meet peak,and we expect to be able to this summer.” The summer 2000 outlookfor MAIN differs from the reality of 1998 when a number of largenuclear plants were off line. However, the region’s summerassessment still is a week or two away.

NERC said its summer assessment won’t be available until thelatter part of May, and a spokesman would not comment on the summeroutlook for power shortages.

Bergstrom also is concerned with the function of ISOs and theirsetting of prices. Yes, ISOs are necessary, he said, but theyshould function only as traffic cops.

“We’re in the worst of all worlds today where we’ve got one footin regulation and one foot in deregulation trying to push thismarket in a period when we’ve got some supply-demand issues. Wethink [FERC] Order 2000 was a good try but probably won’t work,because of the state-by-state issues that are there. We’ve got toget the states committed to making this thing happen. IOUs mustdivest and remove generation from the rate base, and the ISOs mustfocus on system operations and reliability.”

Joe Fisher, Houston

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