Slightly more than one year after Midwest power prices spiked to$7,500/MWh from $25/MWh, causing suppliers to default on contracts,companies to go out of business and federal regulators to concludeit was a one-time anomaly, the power market did it again.

Record power demand, tight supplies and transmission constraintson July 30 sent prices to as high as $9,000/MWh at the Cinergy hub,and hub operator Cinergy Corp. conceded last week that it defaultedon several hourly off-system sales contracts with power marketers.The Ohio-based utility and power marketer sent out “force majeure”letters Friday, claiming there was not enough power supplyavailable on the market to make deliveries, and even if supply hadbeen available it would not have been able to deliver it because oftransmission constraints during peak afternoon hours. The companyneither named the marketers involved nor said how much power wasn’tdelivered.

Some power traders questioned whether it was a case forcemajeure, an act of God, or of “price majeure,” in which Cinergy wasjust unwilling to pay exorbitant prices to fulfill its obligations.Cinergy spokeswoman Angeline Protogere said, however, “There wassimply a lack of available power to us either because of justlimited supplies out there because of the record heat and recordloads that the region was experiencing or [because of] transmissionconstraints that we were experiencing.” She added that there was”at least one other company that failed to deliver,” but she couldnot name the party. She also noted that the hourly load wasnon-firm power.

Temperatures reached the high-90s that day, pushing electricdemand to near record levels throughout Cinergy’s Ohio, Indiana andKentucky service areas. Power demand on its system reached 10,811MW, or about 47 MW shy of the record, and would have broken therecord had it not been for the company’s aggressive requests forvoluntary power reductions, said Protogere. Voluntary reductionsshaved about 500 MW from Cinergy’s power needs that day, she said.The record was set July 22 at 10,858 MW.

“We called more than 2,000 large-volume customers and asked themto reduce their load. If we had not gone out and called forvoluntary conservation we would have blown past that peak byhundreds of megawatts.” Cinergy had warned customers that blackoutsmight occur if voluntary reductions were not made. The company wasable to maintain its on-system deliveries.

Protogere said the company currently is negotiating with powermarketers over the force majeure provisions in their poweragreements and hopes to settle the matter outside of court.

Last summer, multiple power marketers went to court againstFederal Energy Sales when the Rocky River, OH-based marketerdefaulted on power delivery contracts. Many marketers sufferedfinancial losses and some went out of business. The power pricespikes that occurred during the week of June 22 and resultingmarket shake-up triggered investigations by state and federalregulators and hearings on Capitol Hill. Regulators recommendedsome market changes, such as more independent system operators, butgenerally concluded the event was the result of an immaturemarketplace and was not likely to recur.

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