News Analysis

Deck: 
East Coast prices bear an eerie resemblance to California of last spring, but pay no mind, say experts.
Fortnightly Magazine - June 1 2001
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News Analysis

 



 

East Coast prices bear an eerie resemblance to California of last spring, but pay no mind, say experts.

Is it plausible to look at wholesale electricity prices during the early summer months of last year in California, and try to make an educated guess as to what might happen this summer in the other regions? Some say yes, but Ed Krapels, the director of natural gas and electricity for Energy Security Analysis Inc., in Wakefield, Mass., says no.

"California is such a special case, that I don't think a comparison would tell much. ... It took talent to do what they did out there," he says. However, if you are in the business of forward thinking, compare the numbers with words straight from the horses' mouths: the independent system operators (ISO) and reliability councils for the regions shown in the following graph.

Last year, California watched as wholesale electric prices skyrocketed during the early summer months, and continued on an upward trend for much of the year. This year, forecasters see much of the same in the West. Krapels says that even with the FERC caps in place, prices could go as high as $400.

"The caps take much of the uncertainty out of the equation," he says, "even though prices may still be outrageous. There are so many inefficient plants out there, and the heat rate is so high, that we'll see a lot of spikes. Because of this, forecasting prices of $200 to $400 in California isn't that difficult."

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