When industrial electricity demand rebounds, along with continued growth in residential and commercial sectors, a looming imbalance between growing demand and depressed development of new generating plants could further stimulate the wholesale power market later this year or next, according to San Jose, CA-based Calpine Corp.’s CEO Peter Cartwright, speaking to financial analysts Thursday on an earnings announcement conference call.

“We are seeing significant turnarounds; spark spreads (difference between cost of fuel and sales price of power) are improving in most markets, and demand for electricity is on the rise,” said Cartwright, noting that current Edison Electric Institute (EEI) statistics show total power consumption by customers of the nation’s investor-owned utilities increased 4.1% last year and is up another 7.6% (compared to 2001) in January 2003.

“There are some amazing things happening in the power industry,” he said. “Electricity consumption for commercial and residential was up substantially because consumption in the industrial sector was off by 8-10% last year. Commercial and residential not only made up for the industrial decline but pushed up overall consumption (4.1%). So when the industrial demand starts to build back up, we expect to see very strong growth in demand — much more than anyone has predicted so far.”

At the same time, projects now totaling about 162,000 MW are being cancelled or delayed across the country, prompting Cartwright to predict a looming supply/demand crunch. “Demand is building back up and supply is being limited, which causes us to see more and more opportunity for long-term power purchases,” he said, noting that Calpine closed deals on 720 MW of long-term deals in the past 30 days, and Calpine’s sales force is in discussion with customers on an additional 10,000 MW.

Acknowledging that Calpine’s business and strategic plans “have been severely tested” over the past year, Cartwright said there are opportunities for his company to expand its stake in geothermal power production as the demand for renewable energy sources increases and long-term power sales agreements are being beefed up. Natural gas continues to be a key for the firm, too, he said.

“We operate and control more that a trillion cubic feet of gas and we use it as a hedge when we have opportunity to fix electricity prices and the difference between our gas and electricity costs,” Cartwright said. “Having that fuels component in the business gives us the ability to do things that others cannot do.”

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