Study Sees New Power Plants Eliminating Shortages

The current pace of power plant construction could very well lead to the elimination of generation capacity shortages in practically every U.S. regional power market over the next one to three years, according to a new study recently completed by ICF Consulting.

But ICF, which has completed the fourth edition of its "Bulk Power Outlook" subscription study, notes that since power plant construction takes two to three years, generation capacity relief will not be available this summer. Not surprisingly, ICF said that California, other western states and some other power markets face "potentially serious shortages" this summer.

"However, even California can expect to be in balance within three years and prices will moderate and extreme price spikes will occur less frequently," said Judah Rose, managing director of ICF Consulting's wholesale power practice. "Also, we are very concerned about New York City for this summer," Rose added.

The study did point out that in a few markets, including the Electric Reliability Council of Texas, construction is "more than sufficient."

Rose highlighted a couple of factors that he said will work to reinforce the effects of new power plant construction. Specifically, a return to normal hydro conditions by 2002 and moderating oil and gas prices over the next couple of years.

How will all of these changes effect wholesale power market conditions? The ICF study states that unregulated retail sales will become more feasible and that power plant developers will need to be more selective. Also, regulators can expect market conditions to be more supportive of deregulation, especially if they smooth the way for private-sector initiative.

For further information or to obtain a copy of ICF Consulting's fourth edition Bulk Power Outlook study, contact Judah Rose at (703) 934-3342 or Elizabeth Kaiga at (703) 934-3497.

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