The severe supply shortages of 2000- 2001 in the Western Systems Coordinating Council (WSCC) are history, according to Henwood’s WSCC Power Market Forecast Report (April 2002). The region has now returned to adequate reserve margins driven by the competitive market forces that responded to the shortage of energy and capacity. Increasing supply, the impacts of recession, the return to a normal hydro year and substantial conservation by customers all combined to lower demand. Wholesale electricity prices have returned to historical low levels, prompting many developers to cancel, defer, or postpone projects previously announced and/or under construction. More capacity is now under construction than was originally projected despite major cancellations and a worsening liquidity crisis affecting developers. Nonetheless, the impact of competition in the wholesale power markets has dramatically reduced the reaction time for market correction in the current boom and bust cycle.
“Against this background of healthy reserve margins and depressed prices in the WSCC, there are still opportunities for developers who can operate below average costs,” explained Mark Henwood, president and CEO. “”Current conditions offer opportunities for companies with relatively strong balance sheets to optimize their portfolios, hedge their exposure to risks, and strengthen their position vis-Ã -vis their weaker rivals for the next boom cycle taking shape.”
The report covers 11 Western states, two Canadian provinces of British Columbia and Alberta as well as portions of the Mexican state of Baja California. It provides a per spective of the developments in the power markets in the West and other critical factors affecting the long-term price formation process for the period 2002 – 2027.
For more information on Henwood’s WSCC Power Market Forecast Report, visit www.henwoodenergy.com.