Schaefer measure wins praise from UtiliCorp, Enron, and others, but EEI wants relief on stranded costs."The Electricity Consumers Power to Choose Act," introduced by Rep. Dan Schaefer (R-CO),...
Four factors could lead to further shockwaves.
The Northeast transmission grid has suffered a right cross to the jaw, but it could be followed by an uppercut of price spikes and volatility in generation markets by next summer.
In the wake of August's Northeast blackout, most experts agree that the transmission system in the Northeast has deficiencies.
At a minimum, the grid's collapse highlights a strong interdependence between operation of the electric systems in Ohio, New York, and Ontario. Platts Research & Consulting (PR&C) believes that by next summer this interdependent region could experience generation supply shocks similar to those experienced in California in 2000. Coupled with a barely adequate transmission grid, these shocks would represent a serious test of the restructured electricity markets. Four factors drive this concern. Individually the consequences of these factors are limited, but taken together they could add up to the Northeast's "perfect storm."
First, summer peak demand has increased rapidly in Ontario the past three summers, to the point where the region is now summer peaking rather than winter peaking. Ontario's Independent Market Operator contracted for 400 MW of emergency peaking power against potential peak demands and a potential delay in bringing nuclear units at Bruce and Pickering on line. These plants are expected back in service soon, but high summer loads in Ontario change the power equation. Economy interchange between Ontario and its southern neighbors based on seasonal diversity will not be available as it was in the past.
Second, surplus capacity built by private merchant generators has not appreciably increased reserve margins in New York. Mirant operates 550 MW in New York and has tabled its 750-MW expansion of the Bowline Point station. Now bankrupt, Mirant is unlikely to pursue any new construction in the near future. National Energy Group, also bankrupt, has turned the 1,100-MW Athens generating station over to its lenders to complete construction and ensure operation. Edison Mission, operator of the Homer City coal plant, is also experiencing financial difficulties. With these private providers out of the market, it is unclear who will expand generation over the next two to three years.
Third, natural gas prices, which set the wholesale dispatch cost of most new generation, have shown extreme volatility in the Northeast, trading between $20-$30/MMBtu during weather-driven episodes last winter. Similar volatility could occur in summer markets if gas-fired generation competes with storage injections.
Finally, the implementation of the NOx SIP Call will roll out over most Eastern states in 2004. PR&C has highlighted the possibility of a near-term supply shortage as this new emissions trading market aligns, further pressuring wholesale markets. NOx emission prices this summer have traded between $2,900-$7,000/ton in mild summer weather, and they appear likely to trade higher if summertime demand picks up.
None of the foregoing, taken individually, is necessarily cause for alarm.
However, each these factors mirrors the contributors to the California crisis: delayed in-service for new generation, lower hydroelectric generation, natural gas spiking up to $10/MMBtu at California citygates, and a tightening in Southern California NOx emission limits.
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