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To: upanddown who wrote (45461)	5/26/1999 6:50:00 AM
From: Think4Yourself	Respond to of 95453

Does this help answer your question?? High Peak Summer Energy Prices Probable This Year PRNewswire MCLEAN, Va., May 25 /PRNewswire/ -- With Memorial Day rapidly approaching, thoughts turn to backyard cookouts, beach trips, and the renewed need for air conditioning. For electricity traders and utility executives, however, Memorial Day marks the onset of a volatile time period in which a mix of record summer temperatures, outages and deregulation can lead to peak demands, voluntary curtailments, wild price fluctuations, bankruptcies, and profit losses totaling hundreds of millions of dollars. Such was the case last summer, when the price of on-peak wholesale electricity in the Midwest skyrocketed from $30-$50 per megawatt hour to over $400 per megawatt hour in just two days. In fact, the markets were so volatile that at one point, the price of electricity reportedly topped $7,500 per megawatt hour in the Midwest. Such wild fluctuations resulted in massive losses and raised questions about the reliability of the nation's electricity system. The fallout from last summer's price volatility was felt throughout the power industry. Generation outages, high temperatures, new transmission loading procedures and the default of two power marketers set in motion a chain reaction of events resulting in lawsuits and unhappy utility customers in the Midwest. The episode also led to a new round of debates in both government and industry on the merits of power market deregulation. As this summer approaches, the power industry's hot question is "Will the markets repeat the extremes of last year?" Industry analysts currently have little consensus on this issue. Unusual weather patterns and unexpected outages, the two major causes of last summer's crisis according to the Federal Energy Regulatory Commission (FERC), are difficult to forecast, and thus remain highly dynamic factors. The recently released report by the East Central Area Reliability Council (ECAR), which covers a large part of the Midwest, forecasts power demand to hit an all-time high this summer, with a 2.6% increase over last year's record peak. According to James Schretter, President of Beacon Energy LLC, a consulting firm focusing on the energy markets, this increased demand coupled with limited reserves may cause prices to skyrocket along with high temperatures. "The industry has taken steps to prevent last year's run up in prices, including tightening credit, revising trading procedures, scrutinizing transmission line relief, and working to maintain maximum equipment capability," says Schretter. "With only a 10.8% reserve margin in ECAR, however, power supplies are tight and imports from neighboring regions will likely be necessary to meet peak demand requirements." ECAR estimates a 47% probability that the Midwest will require these types of supplemental reserves this summer, an 8% increase over last year's projection. The Mid-America Interconnected Network (MAIN) region may provide additional power, but transmission constraints during periods of extreme weather remain a genuine threat. Although the reserve margin capacity for ECAR has expanded by 1.5% over last year, the region is 2% more likely to exceed contingency margins according to the ECAR report. In addition, industry deregulation activities have made the collection of information more difficult. As a result, says Mr. Schretter, power prices could rise to $500 to $1000 per megawatt hour during peak periods. "It is unlikely, however, that we will see a repeat of last summer's peak prices of $7,500 per megawatt hour due to the lessons learned from last year and resulting new industry procedures," says Schretter. SOURCE Beacon Energy LLC (Copyright 1999) _____via IntellX_____