N. American electricity called adequate for winter
WASHINGTON, Nov 19, 2004 AFX-Europe
North America's electricity producers are expected to meet demand for electricity this winter and perform reliably, an industry-oversight group said Friday.
"If all entities comply with NERC reliability standards, uncontrolled blackouts should not occur," the report said. "Fuel supplies, inventories, and deliveries are expected to be adequate for this winter."
Additionally, the generating outlook has improved due to a net increase of roughly 6,000 megawatts of electric capacity in North America, the report said.
Still, certain pockets of the U.S. will be closely monitored in the event of an unexpected surge in demand.
The report warned that peak demand in North America is expected to rise 2.7 percent this winter over a year ago, while generating capacity margins are "somewhat lower" than those projected for last winter.
The rise in demand is largely a reflection of the "mild winter experienced by much of North America last year," said George Bartlett, chairman of NERC's reliability committee.
But winter storms and unexpected cold snaps that typically spark higher demand for heat could place added burdens on the transmission grid beyond NERC projections.
Potential problem areas
The largest increase in peak demand over last year is expected in Florida, where NERC projects a 33 percent rise in demand year-over-year. Florida experienced a very mild winter last year resulting in much lower electric heating demand, a spokeswoman for NERC said, explaining the dramatic difference.
"If you have a mild winter, it can have quite a big impact on electricity use" in places like Florida that are especially sensitive to changes in weather, the spokeswoman said.
In Texas, where 60 percent of electric generating capacity is fueled by natural gas, there is a concern every winter over possible natural gas supply shortages on the coldest days, the report said. Only a fraction of these gas-fired plants have the ability to run on oil.
The Electric Reliability Council of Texas has said it expects fuel supplies to be adequate this winter under normal weather conditions, the NERC report said.
The populous New England region typically faces some of the harshest weather, and the availability of natural gas supplies in the region is also being closely tracked, Bartlett said.
Last winter, a severe cold snap in January drove up demand for natural gas in the region. At the same time, attractive prices for natural gas led some gas-fired generators to sell supplies presumed to be available for electric generation creating a supply crunch.
This year, market participants in the region will make an additional 2,000 megawatts of capacity available, Bartlett said. A task force was also set up oversee the use of natural gas supplies by the electric and gas markets.
Given current prices for natural gas is possible that electric generators may want to turn a profit again this winter by selling uncommitted supplies. Natural-gas futures closed at their lowest level in over seven weeks Thursday to end at $6.873 per million British thermal units.
"It is my understanding that if a generator does not have a firm commitment, they can sell gas supplies rather than generate electricity," Bartlett said.
David Nevius, senior vice president of NERC, said generators didn't violate any market rules when they opted for an "economic shutdown" to profit off of natural gas market prices.
"Everyone followed the rules but it did lead to a reduction of capacity," Nevius said.
Peak demand is also projected to rise 8.3 percent over levels last winter in the upper Midwest region, including Minnesota, Nebraska, North Dakota, Manitoba, Saskatchewan, and parts of Wisconsin, Montana, Iowa and South Dakota. The difference is predominantly a result of mild weather in the region last winter, Bartlett said.
This story was supplied by CBSMarketWatch. For further information see www.cbsmarketwatch.com .
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