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Gas a Wild Card in Northwest Power Plan

Natural gas wholesale prices, along with those of other fossil fuels, are a major factor that continues to bedevil planners at the Northwest Power and Conservation Council as they attempt to finalize the organization's sixth Power Plan, according to report on the draft plan given to council representatives at their monthly meeting last week.

Along with an across-the-board lowering of most major economic drivers since the first draft of the revised power plan was released early this year, the prices for natural gas and electricity have been lowered in the short-term and "slightly lower" in the longer term.

"Oil and coal prices are only adjusted for the early years of the [2010-2030] forecast to reflect the most recent data and the effects of global recession on prices," said Terry Morlan, the council's chief planner. "The primary need for revising the fuel price forecast is to reflect the current weakness in the fuel markets and to reflect recent changes in the natural gas supply."

Morlan told council members that there has been a "recent rapid growth" in gas supplies generally driven by the advancements in tapping shale deposits, and in addition, the nation has a lot more flexibility in its gas supplies from the recent expansion of liquefied natural gas (LNG) terminals.

Noting that fuel price forecasts continue to be a "significant source of risk" in completing the revised power plan, Morlan said the council staff recommended lowering the early years of gas price forecasts to reflect demand-damping effects from the recession and the expanded domestic supply availability.

"In addition, we recommend lowering the medium to high forecast range to reflect increased supplies and improving technology for accessing shale and other nonconventional supplies," he said.

The medium gas price forecast shows a steady rise during the next 20 years, starting under $4/MMBtu and rising to between $7 and $8, compared to an original forecast starting high (at around $8), dipping below $7 in the early years and going to $8 closer to 2030.

For oil, Morlan said changes in the forecast are "very small," and thus, oil will have little affect on the final plan. Council staff left its forecast for coal prices basically unchanged.

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