Benchmarks

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.