State regulators say they won't bargain under "threat of blackouts," but their complaint only highlights how the power is shifting.
The Michigan Public Service Commission is...
war, sorely challenge strategic-planning processes. In such an environment, forecasting tools are about as effective as a Magic 8-ball. interviews Thos. E. Capps, CEO, Dominion Resources; Eric Markell, senior vice president, Puget Sound Energy; and Bill Hall, executive vice president, Duke Power, on the issues affecting market forecasting.
Fortnightly: What trends do you see in load growth? What are the big issues driving demand trends? Will the oversupply situation persist?
Capps: Demand is going to drive new generation, and what will drive demand is the economy. I don't see the market doing much more than following the economic outlook.
We are primarily focused on the Eastern Interconnect. If you look at reserve margins, everyone, with the possible exception of VACAR [the Virginia-Carolinas service area], has 15 percent or more. There won't be much new generation needed through 2006.
Hall: The high-level issues involve the state of the economy, and particularly the manufacturing base. In our service territory and across the nation, we are seeing manufacturing jobs lost and factories being closed. Those are 24/7 facilities, and when they go away that's a big chunk of electricity revenue that we lose.
Some of that base is replaced with commercial and residential load, but not much heavy industry. We are concerned about it, and in the Carolinas we are getting actively involved with economic development on the state and regional levels.
Markell: In the Northwest, there is a sea change happening with relation to the availability and cost of hydropower. The 60-year era of surplus, cheap hydropower is over. As a regional economy, we've outgrown the available resources, and environmental externalities and licensing processes have imposed heavy costs on the hydro system. For example, we are looking at relicensing three hydro plants, and the requirements will more than double their cost in some cases.
We are seeing in the Northwest and the rest of the country that natural gas has become the marginal fuel. Enormous quantities of natural gas-fired capacity have been built, especially on the West Coast, and we've created a dependence on an uncertain long-term fuel supply. This is driving people to focus on liquefied natural gas (LNG) as a means to both diversify gas supply and temper the amount of gas-price volatility in the U.S. market.
Fortnightly: What power supply options do you see as most important for the long term?
Capps: Right now about all you can build is gas-fired capacity, and it will put a lot of pressure on gas reserves. Clean coal technology is still in evolutionary stages. We read about hydrogen, and it is a good concept, but to go commercial you are talking another 30 years.
What we should be building is nuclear. As a nation, we will never be completely energy independent. But if we want to get closer to that, we need to build nuclear. That is a political problem, not an engineering problem. The political will is not there to build more nuclear.
Hall: It gets back to the diversity of your generation fleet. One-third of our fleet is nuclear. That is a