Despite regional generation capacity additions and a preventative maintenance season, a sustained rally in the oil markets, combined with summer heat, could significantly strengthen power prices this summer, with the greatest impacts seen in such gas-dependent areas as NEPOOL (New England) and the Western Systems Coordinating Council (WSCC), Energy Security Analysis Inc. (ESAI) said in its latest “North American Power Market Watch.”

“We expect the current crisis in the Middle East to keep a strong floor under oil prices,” said Kristin Dall, senior analyst at ESAI. “Depending on the level of military escalation, watch for increasing fuel oil prices and a supported natural gas futures market, as non-commercial entities on NYMEX are likely to ‘go long’ energy in the near to medium term.”

In Northeast power markets, the NEPOOL forward price curve is being kept high by the summer risk premium despite capacity additions, surplus generation and aggressive ISO New England action to pre-empt shortages, according to ESAI. The oil rally and uncertainty regarding nuclear facility shutdowns in the near term could shift prices further. PJM and the New York Control Area have a similar outlook, as forward prices will be kept high despite capacity additions and heavy maintenance outages, ESAI said.

In WSCC, ESAI believes crude market developments should help shape the natural gas market for the short term and add strength that may have been limited by improving hydro generation resources in the region. “Nuclear facility uncertainty and maintenance season will lend additional support as well,” said Dall.

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