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Study Shows Bulk Power Market Grew 15% in '97

Study Shows Bulk Power Market Grew 15% in '97

Although its seen some rocky times in recent weeks, the wholesale power market is growing at a rapid pace and continues to mature, according to a recent study.

Wholesale power sales increased by more than 15% between 1996 and 1997 and now account for 24% of all sales by investor-owned utilities, according to Metzler Services, a division of Metzler &amp Associates. The 1997 operating data for investor-owned utilities is available now from the Metzler Energy Knowledge System (EKS).

"Competition is compelling individual utilities to operate more efficiently and to rationalize investment in new infrastructure," said John E. Hanson of Metzler &amp Associates. "Utilities are maximizing use of existing assets - getting more capacity from existing systems - and taking advantage of the capacity built into the interconnected electric system."

Investor-owned utilities generated about 2.3 billion MWh during 1997 - about the same amount as in 1996. At the same time, investor-owned utilities' wholesale power sales increased from 670 million MWh in 1996 to 765 MWh in 1997, a 15% increase. Thus, wholesale power sales by investor-owned utilities now account for 24% of total sales - up from about 22% in 1996.

The growth of the wholesale energy market has a number of implications including greater asset utilization, enhanced investment attractiveness, and new generation capacity. More efficient use of the existing infrastructure and asset base minimizes the need to invest in new facilities to meet current demands. Utilities experiencing capacity shortages have acquired additional energy supplies from other companies. This has limited the need to build new capacity for now, despite the fact that capacity margins have consistently been dropping over the past 10 years.

The chance to earn competitive returns from investment in electric generation is becoming a reality. "There is no longer regulatory-guaranteed return on investment," said Hanson. "But industry-wide, we're starting to see capital deployed in energy generation with the promise of returns that are consistent with the law of supply and demand."

Joe Fisher, Houston

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