N.Y. power prices seen up 46 pct by 2005 Updated 11:55 AM ET April 18, 2001 NEW YORK, (Reuters) - Summer electricity prices in New York are seen rising 46 percent by 2005 due to a lack of new power plants and transmission facilities, according to a new study by state energy officials.

"Over the past five years, barriers have prevented meaningful new investment in generation and transmission facilities," said David Patton, an independent market advisor for the New York Independent System Operator (NYISO), which runs the state's bulk power grid and administers its wholesale energy market.

Patton, in his annual assessment of the New York Electric Markets, on Tuesday, forecast power prices from June through August will rise 7 percent in 2001, 22 percent in 2003 and 46 percent in 2005. The actual average for the summer of 2000 was near $53.00 per megawatt hour.

One megawatt hour of electricity provides enough power to serve about 1,000 homes for 60 minutes.

Patton said the price rise will occur despite the addition of 1,500 megawatts (MW) of generating capacity in eastern New York State since last summer.

NYISO officials called this and other recent reports a "wake up call" to politicians showing the urgent need to build more power plants and high voltage lines if soaring prices and energy shortages are to be avoided.

"They also underscore a conclusion we reached in our own recent study ... that New York needs to get serious about siting and building significant amounts of new generation, right away," NYISO President and Chief Executive William Museler said in a statement.

Echoing earlier NYISO studies, Patton said higher prices are "largely the result of an increased frequency of price spikes."

For example, Patton said the price spike on June 26, 2000, one of two price spikes last summer, accounted for 20 percent of the average energy price for June in eastern New York.

About 95 percent of the state's wholesale power is traded in the day-ahead market, in which utilities tell the NYISO how much power they need and what they are willing to pay for it.

At the same time, generators tell the NYISO how much they want for their power. NYISO then matches buyers and sellers, picking only the lowest cost suppliers needed to cover the next day's forecast energy demand.

In 2000, Patton found rising electricity prices were caused mostly by a steep increase in natural gas and oil prices, fuels used to run generating turbines, and an extended outage at the giant 1,000 MW Indian Point 2 nuclear power plant.

"Prices in 2000 would have been 38 percent lower in eastern New York and 29 percent lower in western New York absent the rise of fuel prices and the outage at Indian Point," he said.

Meanwhile, cool July and August weather last year kept a lid on air conditioning, keeping energy demand far below early forecasts.

Had last summer's temperatures been closer to their seasonal norm, Patton said prices in eastern New York would have been $25 per megawatt hour higher, an increase of 40 percent over the actual prices.

Weather forecasters have predicted temperatures this summer will be normal.

INFRASTRUCTURE NEEDS

Prices in eastern New York are generally higher than in the western part of the state because transmission bottlenecks make it difficult to move power to heavily populated areas where it is most needed, like New York City and Long Island.

Because of these constraints, the NYISO has determined 80 percent of the power used in New York City must be generated within city limits, while fully 98 percent of the power consumed on Long Island must be generated locally.

For this summer, the NYISO forecast New York City will be 397 MW short of meeting the 80 percent reliability threshold without new plants, while Long Island faces a 132 MW shortfall.

Both regions now have plants under construction and will likely meet their regional requirements this summer.

"The first priority for ensuring the competitiveness of the New York markets must be to facilitate the entry of new generation and investment in transmission," Patton concluded.

Without new generation and transmission facilities, Patton found the markets will become increasingly vulnerable to "large price fluctuations" and "market power abuses."

Market power abuses occur when generators withhold supplies by either bidding it into the market at high prices or keeping it out of service, boosting prices by constricting supplies.

Patton found that except for "several isolated instances," suppliers bid power in a manner consistent with workable competition. He noted that the isolated instances have since been remedied by the NYISO's current mitigation rules.

Since the start of the year, amid California's energy crisis and the NYISO's warnings, the State's Siting Board has already sped up the approval process for new electric facilities.

There are more than 80 proposals now before the Board representing over 25,000 MW of potential generating capacity.

However, the board may be too late to prevent higher prices this summer or next since it typically takes about two to three years to build a new plant once it has been approved.

http://news.excite.com/news/r/010418/11/utilities-newyork-prices

-- Martin Thompson (mthom1927@aol.com), April 20, 2001