Based on current reservoir levels, it is unlikely that hydroelectric output in the Pacific Northwest will return to normal levels in the coming year, and demand on gas-fired units will increase, a new report by Arlington, VA-based Energy and Environmental Analysis Inc. (EEA) concludes. As a result, EEA has adjusted its forecast for hydroelectric generation downward for 2002 and 2003, with a return to normal output in 2004.

“We have made some significant adjustments to our 2002/2003 power generation forecast for California and the Pacific Northwest,” EEA said in its January 2002 Monthly Gas Update.

EEA has reduced the forecast of electricity exports from the Northwest to California to reflect the lower hydroelectric generation. In addition, EEA projected reduced 2002 electricity demand in California to take into account increased conservation efforts such as those that occurred in 2001. The conservation effects offset some, but not all, of the reduction in electricity imports from the Northwest, according to EEA. The net result of these changes is a tighter electricity supply/demand balance throughout the Western Systems Coordinating Council and greater gas consumption for power generation, the report added.

EEA’s current projection has power generation gas demand increasing in 2002 by 9% over 2001 levels, from over 4,200 Bcf to almost 4,700 Bcf. EEA said that the increase results from less gas-to-oil switching due to lower gas prices and continued high utilizations at gas-fired plants in the western U.S. due to continued lower hydroelectric output.

“Our forecast for 2002 electric sales is essentially flat at 3,400 GWh,” EEA stated.

EEA said that a side effect of Enron Corp.’s collapse has been a shift to more conservative capital planning by many of the big merchant energy companies. Many of the major players have disclosed reductions in planned capital expenditures, EEA noted, although there have not as yet been specific announcements on which planned facilities will be postponed or canceled.

As discussed in a previous Monthly Gas Update, EEA believes that a large percentage of the 103 GW of new capacity planned for 2002/2003 is at risk of cancellation. Of the 103 GW, about 75 GW are in some stage of construction. “Clearly, the 28 GW still in the planning stages are most at risk,” EEA said, but much of the capacity under construction may not be completed either, it noted.

According to EEA, multi-turbine facilities may be scaled back to only one or two turbines, and plants in the early stages of construction may be put on hold due to financing constraints. “The length of the economic recession will play a large part in determining whether the power plant construction boom takes a brief pause or comes to a crashing halt.”

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