Anyone who’s been outside just about anywhere in the countryknows summer came on early this year and came on strong. Electricutilities that usually don’t hit their demand peaks until July orAugust hit their high marks last month. And the heat likely won’tbe retreating in August.

“Usually we don’t see records until July or August,” saidMichel’ Philipp, spokeswoman for Western Resources. “The industryright now is looking at some incredible activity because of thetemperatures and humidity that we’re experiencing nationwide,especially in the Midwest region. It’s been really hot, reallyearly.” Western’s Kansas Power & Light peaked July 6 at 2,190MW, but the company’s Kansas Gas & Electric hit its high markJune 29 at 1,985 MW. Similarly, Houston Lighting & Powerreached its yearly peak in June instead of August last year andJuly the year before. Already, the Electric Reliability Council ofTexas (ERCOT) has set records and near records many days thissummer, pointed out one Midcontinent gas trader. Record powerdemand has been accompanied by reports of gas-fired generatorsburning record amounts of gas for this time of year.

Tucson Electric Power Co. (TEP) recently established about halfa dozen new peak-demand records in about as many days in its retailservice area. A net hourly peak demand of 1,763 MW was reachedduring the hour ending 5 p.m. MST Wednesday. The record not onlyexceeded the previous record set Tuesday, but also exceeded thecompany’s 1999 projected forecast of 1,752 MW of demand.

Chicago’s Commonwealth Edison (ComEd) Tuesday announcedfinancial incentives to all customer segments to prompt energyconservation.

According to the Energy Information Administration (EIA), gasuse by electric utilities is expected to rise to 3.09 Tcf next yearfrom a projected 3 Tcf this year. In 1997, electric utilities used2.97 Tcf. Looking at second quarter figures for each year,utilities used 0.72 Tcf in 1997, and gas usage is projected to jumpto 0.80 Tcf for the second quarter of this year.

With more gas-fired generation being built to replace retirednuclear facilities, some have voiced concern for the gas supplypicture. Not everyone, though. “I can’t help but feel that we havemore deliverability out there with new gas than people arereporting,” the trader said. “There’s no way we should be at thelevels we’re at with storage. The producing region’s fuller thanany other region on a percentage basis. I think some of thatoffshore production is coming on from the deep-water, and I don’tthink it’s getting included [in supply totals].”

With storage as high as it is, the trader said he is skepticalgas can remain at $2.00/Mcf or more this fall. Going into fall witha storage overhang and no hurricanes on the horizon would meanSeptember and October could trade well below $2.00.

Besides the weather, the high gas storage level is the strongestfundamental affecting prices now, said another trader. “I thinkwe’re going to continue to see [price] strength through the summer;however, with the storage levels as high as they are, come fall,September, October, perhaps, we’re going to see – because ofstorage levels being so high – we’re going to see a lot of gasneeding to find a home, which I think is going to depress prices.”

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