Frontlines

Deck: 
Beware of a national energy crisis that eclipses California's.
Fortnightly Magazine - April 1 2003
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Beware of a national energy crisis that eclipses California's.

It seems rather elementary in an economic downturn to say that generating capacity will easily match demand over the next few years, especially with all the new plants that have been built lately. But what happens to the supply picture when you factor in a possible economic upswing, with continued high natural gas prices, an illiquid wholesale market, and an aging transmission infrastructure?

These were but some of the concerns voiced by David Sokol, chairman and CEO at MidAmerican Energy Holdings, before the U.S. Senate Committee on Energy and Natural Resources in March, testifying on the financial condition of the industry.

At the Senate meeting, Sokol said, "In the last three years, more than 170,000 megawatts (MW) of planned new capacity have been tabled or canceled. Some of these cancellations represent an appropriate correction for overbuilding, but some needed projects are also being suspended. Moreover, there is significant under-investment in transmission facilities, also caused by the lack of capital availability."

In addition, Sokol said that if the industry fails to turn the situation around, he fears that the industry will be laying the groundwork for a repeat of the Western energy crisis. In fact, Sokol sees more than a few similarities between the current state of the industry and the conditions that led to the Western crisis.

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