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State is warned of potential for shortages in electricity

By Bill Koenig

Indianapolis Star

January 30, 2001

While Hoosiers continue to hurt from record high natural gas bills, utility experts warn that the state could face an equally tough dilemma with electricity.

If the use of electricity in Indiana and the Midwest continues to grow faster than the region's capacity to generate it, Hoosiers could ultimately face the same predicament as Californians, experts told state lawmakers on Monday.

"Just as in California, demand has outpaced supply," said James Turner, president of Cinergy Corp., one of Indiana's biggest suppliers of electricity. "Economic growth is outstripping the ability to meet demand at peak times."

Hoosiers don't have to look far to see the potential for trouble.

In the summer of 1999, Cinergy and Indianapolis Power & Light Co. both warned their customers to conserve electricity when the utilities, which had some power plants shut down for routine maintenance, faced a record heat wave.

Though the blackouts never came, both utilities at the time said their cushion of electricity supply over demand was exceedingly thin. It prompted the state of Indiana to prepare an emergency plan to shut down all but essential services last summer if the problem were to repeat, but cooler than normal weather staved off any such woes.

Still, that potential for problems means that Indiana can't take its power supply for granted.

"We're not as prepared as we need to be," said Sen. Teresa Lubbers, R-Indianapolis, a member of state Senate's Energy and Economic Development Committee. She called for the state to develop a formal energy policy.

The focus on electricity is heightened by the troubles facing California, where residents and businesses have been subjected to rolling blackouts as utilities cannot supply enough electricity to meet demands.

During the past days, workers have been trapped in elevators and the lights have gone out as blackouts roll across the nation's largest state. Some fear ripple effects could damage the country's economy.

The California crisis has turned attention to the availability of electricity elsewhere.

While Indiana and the Midwest don't face an imminent crisis, a key to keeping the power flowing, Cinergy's Turner said, are the so-called "merchant power plants" that are being built across Indiana.

The small electric plants are focused on producing power for peak demand times. About 30 such plants have been proposed in Indiana and Cinergy is an investor in a so-called "peaking plant" that remains uncompleted in Henry County.

Such plants have drawn criticism from nearby neighbors and from critics who say the plants would likely send much of their electricity beyond state borders.

Turner said the plants add to the overall available electric supply.

"Being a net exporter of power is far more preferable to being a net importer of electricity as California has learned," he said. "Indiana should heed California's distant drum now so as to avoid facing more unpleasant music closer to home."

Grant Smith, environmental policy director of the Citizens Action Coalition, a utilities watchdog group, disagreed.

"There is not enough of an emphasis on reducing demand," he said. "Energy efficiency is available all year round. We see this as a demand problem, not a supply problem."

Trying to cope only by conserving power, Turner said, "is the same exact attitude that has brought California to the brink of disaster."

While the Senate committee heard the potential for future electric-supply problems, it also heard that the state's price crunch on natural gas could ease.

Senators were told that record-high gas prices could fall later in the year, even though demand for the clean-burning fuel continues to increase.

Sen. Thomas Weatherwax, R-Logansport, the committee chairman, said he wanted a more detailed look at natural gas prices.

"Right now everyone is thinking about their monthly heating bill," Weatherwax said. "But it has enormous ramifications beyond that."

Natural gas rates for consumers shot up by 50 percent or more toward the end of last year -- just as usage jumped with much-colder weather in November and December compared to those same months in 1999.

For some customers, the result was a gas bill that doubled or tripled.

While consumers did a double take, Monday's hearings showed that business and universities also are dealing with sticker shock.

Phil Gray, energy manager for Central Soya in Fort Wayne, a food processing company, saw its energy costs jump from $26.6 million in 1999 to $34.8 million last year, mostly because of the natural-gas price increases. "We are an energy-intensive industry," Gray said.

Also, Indiana University's Bloomington campus, which in recent years went to a blend of coal and natural gas for heat, has been forced to go back to all coal. Without taking that action, IU's heating bill would have jumped $700,000. As it turns out, that will offset $500,000 in higher heating bills at satellite campuses that rely on natural gas.

One consequence of the higher gas prices is that drilling companies are again exploring for new sources of the fuel.

At the end of 1999, those companies had 600 rigs drilling for gas in the United States; at the end of last year, that figure rose to 879. The additional gas being produced is expected to bring prices down by the second half of this year, although gas will still cost more than double record low prices of 1998 and early 1999.

http://www.starnews.com/news/articles/energy0130.html

-- Martin Thompson (mthom1927@aol.com), January 30, 2001