Southern Company CEO A.W. “Bill” Dahlberg is something more thanshy about predicting where gas prices will go. But the industry’sembrace of gas-fired generation does prompt a modestly optimisticresponse to the question. “It would be logical to say that ifthere’s that much new demand for gas, the likelihood is that itwill drift up. And I guess if I were making the bet, that’sprobably the bet that I would make,” Dahlberg told reporters duringa briefing at the 17th Congress of the World Energy CouncilWednesday in Houston.
For the time being at least, gas is king when it comes to newand replacement generating capacity. Southern Company-which burnscoal to generate about 70% of the power needed for its utilityservice territory in the Southeast, uses nuclear power for another20% and gets the remainder from all other sources – is also on thegas-fired bandwagon. Responding to environmental concerns and theKyoto Treaty, Southern has begun to co-fire some of itssoutheastern generating plants with gas. “New additions to capacitywill be gas at this point in time.” Still, Dahlberg cautioned thatenvironmental policy should include an energy policy that embracesmultiple fuels, he cautioned.
As far as electricity prices go, they’re expected by Southern toremain strong in the Midwest, at least for the next two years,according to Thomas G. Boren, CEO of Southern Energy. “In light ofwhat happened this past summer, for 1999 and 2000, I think in theupper Midwest and so forth you’re still going to see, from a powerperspective, a very tight market in 1999, and it will continue tobe tight in the year 2000. I think what’s going to happen in 2001is you’re going to see that level off.”
June’s wild electricity market did not harm Southern, theexecutives said. While the company did not sell any power at thenow legendary $7,000/MWh figure, it did all right just the same,Dahlberg said. “I think what the summer taught us was a couplethings. First, that we really haven’t built electric capacity inthis country in the last few years. And when we get a spike like wedid this summer. at the same time we did have units that were out.Units being out shouldn’t be unexpected. Unfortunately it all hitat the same time and it all got very narrow and as a consequencemarket prices did go up.
“We had another phenomenon to add. That is, we had numerouspeople in the market that don’t have any generation. I think over aperiod of time the lesson will be that you do end up having to havesome asset to produce kilowatt hours when kilowatt hours areneeded. That’s a pretty simple thing to say, but I think that isone of the lessons we’ve learned, and I think we’ll see peopleadding capacity.”
Other fallout from June is a continuing squeeze on marketers wholack risk management abilities and generation, Dahlberg said. WhileSouthern made it through “unscathed,” the company did get a coupleof lawsuits, on which Dahlberg refused comment.
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