The Cost of Natural Gas [was Re: The Cost of California Liberalism]

[Raymond D. Mereniuk]

auto58194 at hushmail.com wrote
Tue, 19 Dec 2000 13:15:09 -0500 (EST)

> Raymond's pointed out that some gas plants normally idle are now running 
> full-time to meet demand.  To me this reads the same as using idle plants 
> instead of building new ones.  Perhaps not a bright move in terms of safety,
>  efficiency and reserve capacity, but nothing that should have changed natural 
> gas commitments.  

In my initial message I stated the current rise in natural gas prices 
are caused by multiple factors.  Natural gas prices were too low in 
recent years and this caused a shortage in supply.  Narural gas has 
gained in popularity with utility companies in recent years because 
it is clean (relatively) and it is cheaper and easier to implement 
natural gas burning technologies than other fuel source 
technologies, ie - coal which would be cheaper but more difficult to 
meet current emission standards and "current" public expectations. 
On top of these factors I stated the greater portion of the increase 
was created by un-expected demand in California.  Another issue 
in this problem, as in this month and next, is low water levels in the 
northwest causing lower than expected power generating capacity.

In the past natural gas power plants were viewed as temporay or 
part-time solutions as they are relatively  cheap to construct.  If you 
have a power plant you don't expect to use you don't commit to 
much of a supply as you don't expect to use the plant.  At this time 
many auxiliary power plants in California and surrounding states 
are being utilitized to generate power for the California market.  
There was recently a federal mandate that power suppliers in 
neighbouring markets not refuse to provide power to California 
utilities.

Coupled with the low water situation, and the resulting decrease in 
hydro generated power, the increased use of natural gas powered 
generating capacity would be expected to cause an increase in the 
price of a commodity in which the increase in demand was 
unexpected or exceeded supply.

If a power generating utility had built new power plants and 
commited to a fuel supply (and the accompanying infrastructure) the 
likelihood of unexpected prices increases would be much lower.