IOUs take action, but other overriding forces will affect prices in the near term.
Gary L. Hunt is vice president-Consulting & Advisory Service at Henwood Energy, a division of Global Energy Decisions, a provider of market, risk, and operations management software and consulting services for the electric power industry.
Jon Ecker is president of Energy Velocity, also a division of Global Energy Decisions, providing statistical and geographic data and applications for energy markets.
It's going to be a wild summer for the Western Electricity Coordinating Council (WECC), courtesy of higher than forecasted load growth, high gas prices, delays and cancellations of renewable resources, and lower than normal hydro generation. These conditions will drive faster than expected market recovery in the West (especially for merchant generators) and will increase the price volatility exposure of the municipal and investor-owned utilities that rely upon the markets to meet load.
Any comeback requires a strong start, and the West got its start from above-average load growth. Aluminum smelter loads in the WECC likely are gone for good, but utility peak load grew 5 percent and energy sales grew 4 percent from 2002 to 2003. Many Western utilities have published new load forecasts representing higher than formerly predicted growth. The California ISO load through the end of May 2004 is up nearly 6 percent over the first 5 months of 2003. While some utilities are bullish on load growth, we see loads increasing by nearly 2.5 percent over the forecast of 6 months ago.