Bulk power transactions in 1997 increased significantly over1996 levels, pointing to the continued emergence of a competitivewholesale power market, according to Metzler Services’ 1997operating data and statistics for the electric utility industry.

Sales of wholesale power increased by more than 15% between 1996and 1997, and now account for 24% of all sales by investor-ownedutilities, according to Metzler Services, a division of Metzler& Associates. The 1997 operating data for investor-ownedutilities is available now from the Metzler Energy Knowledge System(EKS).

“Competition is compelling individual utilities to operate moreefficiently and to rationalize investment in new infrastructure,”said John E. Hanson of Metzler & Associates. “Utilities aremaximizing use of existing assets – getting more capacity fromexisting systems – and taking advantage of the capacity built intothe interconnected electric system.”

Investor-owned utilities generated about 2.3 billion MWh during1997 – about the same amount as in 1996. At the same time,investor-owned utilities’ wholesale power sales increased from 670million MWh in 1996 to 765 MWh in 1997, a 15% increase. Thus,wholesale power sales by investor-owned utilities now account for24% of total sales – up from about 22% in 1996.

The growth of the wholesale energy market has a number ofimplications including greater asset utilization, enhancedinvestment attractiveness, and new generation capacity. Moreefficient use of the existing infrastructure and asset baseminimizes the need to invest in new facilities to meet currentdemands. Utilities experiencing capacity shortages have acquiredadditional energy supplies from other companies. This has limitedthe need to build new capacity for now, despite the fact thatcapacity margins have consistently been dropping over the past 10years.

The chance to earn competitive returns from investment inelectric generation is becoming a reality. “There is no longerregulatory-guaranteed return on investment,” said Hanson. “Butindustry-wide, we’re starting to see capital deployed in energygeneration with the promise of returns that are consistent with thelaw of supply and demand.”

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