New federal policies portend a wave of demand-response programs, and perhaps a new era in resource planning.
When President Bush signed the energy bill on August 8, he set in motion a chain of events that might lead to major changes in the way utilities price and meter retail electric services—and ultimately in the way they value and use non-traditional energy resources.
Many of the obstacles and strategic issues that utilities face today are all too familiar. This time they must be solved with a different business model.
High Gas Prices:
Conservation programs, plus an erosion in domestic manufacturing, will lead to a falloff in gas demand.
The conclusions made by the NPC gas study raise more questions than they answer.
In late September of 2003, the National Petroleum Council (NPC) issued a comprehensive study on the future of the U.S. natural gas industry.1
Russia resurrects the Kyoto Protocol and the prospect of either mandatory CO2 emissions cuts for U.S. utilities, or the start of a global trade war.
In June 2001, the Bush administration withdrew an earlier campaign pledge to support the Kyoto Protocol, claiming that the treaty was fatally flawed in not requiring China and India to reduce carbon dioxide (CO2) emissions and that the science underpinning the treaty was not yet definitive enough to justify the costs of compliance.1
Commission Watch
CPUC questioned historic oversight authority.
To guarantee the continued growth of liquefied natural gas (LNG) importation and use in the United States, the energy industry needs to pay close attention to govern the regulation, siting, and operation of LNG import terminals-issues traditionally overseen by the federal government.
Greater reliance on gas-fired power implies serious economic, technological, and national security risks.
Over the past two decades, the United States has, by default, come to rely on an "In Gas We Trust" energy policy. Natural gas increasingly has been seen as the preferred fuel for all applications, nowhere more than in the electric generation sector. However, the greatly increased use of natural gas forecast for the electricity sector may not be economically or technically feasible, and it does not represent optimal or desired energy policy.
Despite development challenges, LNG capacity is destined to play a bigger role in the U.S. energy mix.
When MidAmerican Energy announced its plans to build a pipeline to bring stranded Alaskan natural gas into the lower-48 states, the U.S. energy industry stood up and took notice. If successful, the project will bring the largest infusion of gas that this country has seen in many years-and not a moment too soon.
Perspective
Two Cato analysts suggest a return to the past-vertical integration, but now with no state regulators.
The defeat of the energy bill in the Senate last year has thrown electricity restructuring back on its heels. There clearly is no consensus among politicians or academics regarding how this industry ought to be organized or how it might best be regulated. Finding our way out of this morass requires a reconsideration of how we got to this dismal point in our regulatory journey.
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.