In Energy Crunch, It's Heat vs. Lights
A hot summer has some utility companies scrambling to meet surging power needs, amid uncertainties of deregulation.
NEW YORK — Turn up that thermostat until a light sweat beads your brow. Don't forget to switch off the lights in the TV room when you head to the kitchen, and while you're there, chip off the frost on those TV dinners - the freezer gobbles energy.
Messages like these are expected to nag energy users for the rest of the summer, as some utilities warn they may run low on electricity if the next few months stay hot and steamy. People in Chicago, northern Michigan, and New England, in particular, could experience "energy alerts," the industry's euphemism for power shortages. Commonwealth Edison in Chicago, a giant in the industry, is even offering to pay big commercial users the equivalent of their electric bills if they shut down for an hour during peak demand.
As utilities scramble to buy more power, the effect on residential utility bills is uncertain. So far, many electricity suppliers have swallowed the cost of buying electricity on the spot market at 200 times the normal price.
But consumer groups worry that some of the extra surcharges will end up coming out of residents' pockets. Sen. Richard Durbin (D) and eight other members of the Illinois congressional delegation have asked the Federal Energy
Regulatory Commission to hold an emergency conference to investigate the price spikes during the Midwest's heat wave last month.
The power shortage follows the continuing deregulation of the industry. Without the benefit of regulatory protection, many utilities are shutting down inefficient power plants. Expensive nuclear facilities are particularly vulnerable.
Moreover, the shutdowns come at a time when demand for energy, spurred by a still-frisky economy, is growing. In New England, for example, demand is up 3 percent compared with last summer.
"The issue is very much on the minds of the power industry," says David Swanson, a senior vice president at the Edison Electric Institute, a Washington-based trade association. "The critical factor is how soon there will be clear market signals that allow huge investments to be made."
The power-generating shortage is exacerbated by the weather.
The Southwest is broiling in 100-degree heat. Tucson, Ariz., was expecting 108 degrees yesterday. In Brownsville, Texas, the thermometer stayed above 80 degrees for 20 nights in a row.
The Northeast is just starting a hot and humid stretch. Government officials are predicting that it could be the warmest July in the past 600 years.
Normally, even this type of hot weather wouldn't cause problems for the power companies. They usually have enough reserve capacity or can buy enough electricity to supply power during peak periods. However, in late June, many Mid-west utilities had shut down generating plants for maintenance. Then, a series of violent thunderstorms knocked out transmission lines and generating stations. The end result was a massive power shortage.
Since then most of the generating stations are back producing electricity. In New England, Northeast Utilities has brought some nuclear power plants back on line. In Toledo, First Energy has reinstalled transmission lines after a tornado whipped past a nuclear power plant that had to be shut down.
Despite the additional power, utility executives are still concerned about the rest of the summer. In New England, the Independent System Operator (ISO), which runs the pooling of power resources for the region, is predicting that it will be short electricity on four to five occasions the rest of the summer. This means that large consumers of electricity will face power curtailments during these peak periods.
But, the industry is also appealing to residential customers to conserve power by raising the air-conditioning thermostat to 78 degrees. "Just simple things like turning off the lights or doing the laundry in the evening really helps," says Jim Sinclair, manager of government affairs for the Holyoke, Mass.-based ISO. On June 26, after a similar appeal, demand dropped by 1 percent.
In Chicago, Commonwealth Edison has gone even further. On Tuesday, it announced a $10 million energy conservation program, which includes an incentive program that will pay large users to reduce their usage. The utility is also planning to allow small businesses to get lower electric rates if they agree to join the pool of "interruptible" customers. In the past this has been limited to very larger electric users. During peak loads, those customers lose their power first.
The company is also offering to provide 150,000 compact fluorescent light bulbs to their customers. The bulbs draw only 20 percent of the power and last for seven years.
The company is also trying to inspire its own 17,000 employees to save power. This prompted a local paper to send over reporters with a thermometer. Fortunately, for the company, the paper found the temperature on the executive floor was 78 degrees. "Can you imagine what they would have done to us if the temperature was colder?" says Don Kirchoffner, a spokesman.