Fortnightly Magazine - January 15 1997

Wholesale power transactions continue to grow. During 1995, utilities spent more than $58 billion on bulk power and, for the first time, investor-owned utilities spent more for electricity ($30 billion) than for fuel ($29 billion) to generate it. The reasons for the expansion can be traced to more aggressive marketing strategies by electric utilities, an increasingly competitive group of independent power providers, and the presence of power marketers as a formidable and growing group of power traders.

Expansion in wholesale markets is hardly new.

Southern Communications Services, Inc., which recently entered the wireless communications market, has begun to market products and services under the name of its parent, Southern Company. Southern also is parent to Alabama Power, Georgia Power, Gulf Power, Mississippi Power, and Savannah Electric.

Gulf Power, meanwhile, signed a contract with Scientific-Atlanta, Inc. for two-way energy management applications. Some 40,000 homes will be fitted with the interactive systems over eight years.

A study procured by the INGAA Foundation (Interstate Natural Gas Association of America) finds a resurgence in use of liquefied natural gas (LNG) as a peak-shaving alternative for local distribution companies (LDCs).

The study, "The Use of Liquefied Natural Gas For Peaking Service," conducted by Stone & Webster Management Consultants, Inc., attributed a rise in the use of LNG plants for peak shaving to a deregulated environment (FERC Order 636, plus use of the "straight fixed-variable" rate design for gas pipeline capacity), which forces LDCs to assess their true capacity needs.

An oft-heard argument these days says that states with low-cost power should refrain from restructuring their electric utilities. This argument has gained credence in some states, where protectionists have used it to slow down the liberalization of electricity markets. The rationale is simple: Because the state would export its low-cost power, local consumers would lose. They would face higher electric prices than if their state had somehow confined its low-cost resources within its boundaries.