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Experts Try to Explain Run-up in Energy Costs

by Associated Press
The Oregonian, July 19, 2000

Traders and officials say that several factors are to blame
and that more plants should be built

SPOKANE -- To keep recent high wholesale electricity prices from becoming a long-term problem, more generating plants will have to be built, energy experts told the power committee of the Northwest Power Planning Council on Tuesday.

The committee is studying an unprecedented run-up of wholesale power costs; wholesale electricity that was selling for an average of about $25 a megawatt in April skyrocketed to more than $125 in June.

Energy traders, utility officials and representatives of large industrial electricity consumers told the committee the high power costs were caused by a combination of factors, including declining reserves, low Northwest hydropower generation, power plant outages and increased demand by California customers for air conditioning during a heat wave.

The situation may have been exacerbated by deregulation of the electricity market, allowing buyers and sellers to seek the best deal, speakers said.

Some electricity futures traders who sold more low-cost power than they could deliver had to pay top rates to buy enough power to meet their obligations, said Murray Margolis, the head trader for B.C. Hydro's Powerex.

Tim Belden of Enron, a major energy marketer, predicted that prices would remain high for another two to four years as demand approaches the region's capacity to produce electricity.

Steve Oliver, a Bonneville Power Administration power marketing administrator, said the region needs a competitive energy market but with some rules for sharing resources during periods of extreme stress.

Associated Press
Experts Try to Explain Run-up in Energy Costs
The Oregonian, July 19, 2000

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