High demand, low supply mean skyrocketing power prices

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High demand, low supply mean skyrocketing prices in power markets Northwest's heat wave dries up sources of deregulated electricity

Thursday, June 29, 2000

The Associated Press

YAKIMA, Wash. -- Electricity prices are soaring in the deregulated wholesale markets of the western United States, where record-high temperatures are driving up demand and four power plant failures have kept supply low.

"Basically, you have wholesale power being traded like any other commodity," Ed Mosey, spokesman for the Bonneville Power Administration, a federal power marketing agency, said Wednesday.

"When weather conditions are hot and demand goes up in the Southwest and the Northwest, the sellers raise their prices -- the buyers pay because they have no alternative."

Prices in central Washington's Mid-Columbia Basin market ranged from a low of $300 per megawatt-hour to a high of $900 per megawatt-hour on Tuesday and remained high Wednesday.

In the regulated marketed, prices this time of year typically would be in the $20 range.

Georgia-Pacific West shut down its paper mill in Bellingham in Western Washington and laid off more than 600 workers Tuesday due to the high cost of electricity. The mill will not reopen until the wholesale price of power drops, said plant General Manager Jim Cunningham.

Western Washington and Oregon baked in record-setting temperatures in the upper 80s to near 100 this week. East of the Cascades, it's been equally hot but not at record levels. A cooling trend was forecast for today, the National Weather Service said.

The brief heat wave came at a time when the power supply is low in the West.

The 1,200-megawatt Columbia Generating Station, the Northwest's only commercial nuclear power plant, shut down automatically on Monday.

"The initial thinking is that a buildup of dust on a bus bar that conducts electricity from the main generator to the transformer yard allowed an arc to form," said Don McManman, a spokesman for Energy Northwest, the power consortium that owns the plant on the Hanford nuclear reservation in south-central Washington.

"When that arc flashed, sensitive instruments within the plant automatically opened circuits to protect delicate instruments, much like a fuse box in your house."

The turbine tripped, and the reactor shut down. Managers plan to begin the process to bring the plant back up today.

In addition to the nuclear power plant, there was a reduction in generation at three coal- fired plants in the West -- Centralia in Western Washington, Colstrip in Montana and Jim Bridger in Wyoming, which sustained various forms of shutdowns.

That means there's less power to purchase at a time when demand is high, Mosey said.

All the electricity from the nuclear plant -- enough to power three cities the size of Seattle -- is sold by BPA, which has had its regional hydroelectric dams operating at full capacity.

Prices are high in other Western power markets as well. At the California-Oregon border, the low was $600 per megawatt hour and the high was $700. In California at Palo Verde, the low was $450 and the high $600.

"I heard that there were prices that went over $1,000," Mosey said.

Ultimately, such high prices can hit consumers in the pocketbook when they crank up the air conditioner, but only minimally when such problems last a short time, Mosey said.

"We're talking about 365 days a year, and this is only seven or eight days," he said.

Prices should drop down into the low $70s and $80s when the weather cools.

Additionally, many wholesale purchasers have their own power plants, operating in the range of $20 to $40 per megawatt hour, so they likely only have to buy very high-priced power for perhaps 10 percent of their need.

Mosey said that as recently as a year ago, there were questions as to whether deregulated pricing would be sufficient to stimulate the development of new power plants.

Now, "we're looking at long-term prices well over $30, so a new generating plant becomes quite economical and profitable for developers," he said.

"This hot spell shows two things: We're needing more generating resources and, two, the price might be sufficient to motivate developers to build them."


-- Martin Thompson (mthom1927@aol.com), June 29, 2000


Martin, Thanks for all of your posts on utilities and oil/gas. I've been following them for some time. slza

-- slza (slzattas@erols.com), June 30, 2000.

Thanks Slza

It is nice to know that someone is getting something out of all these posts. The energy problem seems to be increasing rapidly.


-- Martin Thompson (mthom1927@aol.com), June 30, 2000.

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