INFORMATION #1 11-16-1998 - Laserfiche WebLink

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c'tr c ty Uhaos tall \vtql shm'l ~)[ p~ak SllUlnlor delUalld. Illilllh's sl'raml)le(I for pow('r'. In ()bio, Au,,'i('au Electric l',~wcr C(). says it rllSh~'(I iililinlellall(.t~ lo ~'et Sl)llll~ plants restarh,(I in time fur slunlnel' peaks. inollw(,allh Edison Co., a [JllJCOm Corp. Hnil. i'ven F~nlo(I 711 (liest~l gelleralOl'S nor- ulally ust,(I for power al carnivals and l)arke(l them for emergency use at its elec- Irical substations around Chicago. Bnt in .hme, disaster struck. Several nu- ch,ar planls around the ILS. were already ilown [o1' sah~ty or nlainlt~llanco reasons. On .hme 2.1, simms knocked out more big plants across lbe Midwest. The next day, with tem- I}eratures s(mring into the 90s, Midwest util- ities tried to buy power from plants in the East an(I lhe Soulh. But a slump in building Ira[~smissJon lilies Ja I'eeonl years bin(lerefl movement el' electricity. "We jusl couldn't ~et entn~gb power in here," says Robert Reynolds, a vice presi(lent of lllinois Power Cu., a m]il o1' Illinova Iltilities rushed into the Sl)Ol market to buy power. Electricity, normally selling at al'O~Hl(l $311 a megawatl-hotu', soared to $7,501} that (lay. At Commonwealth Edison, lbo (liesel ~enerators weren't enough, and Ihe utilily paid as much as $6,000 a megawalt-h(mr. "There was panic in the ularkel, and pri(:es were all over the map," says Paul McCoy, a senior vice I)resident. Fighls broke out over rights to power. At 11:19 a.m. local lime ou .lune 25, Indi- anapolis Power & I,igbt Co. alleges, it was Iold by a I,ouisville Gas & Electric Cu. unit called I,I,;M Ihat beginning at noon, the In- dianapulis utility wouldn't get fixed-price ~qectricily it had contracted for. Indianapo- lis l'ower appealed to the pnblic for conser- valhm, and "we were imme(liately on the photo, lo 1.1,;M's lawyers," says Vice Presi- denl Mi('l)ael Bailla. Full power wasn't re- stored uolil 4 p.m. Meanwhile, according Io the lndiatm polls (:(anpany, the l.ouisville Gas nnit offered to sell power in a separate deal, bul al a spot ~narket rate or $4,200 per megawult-hour, far higher than the con- tract pri('e. That, Indianapolis Power told I,EM, was "extortion." In(lianapulis Power, a unit of Ipalco En- terprises Inc., sued the ~uisville Gas unit, part of LG&E Ener~ Corp., for damages in federal court in Indianapolis. The issue was setlled oul of court "in our favor," Mr. bparks bu. ge in Demand for New Pla. tt,s Southeru Co. will build a 300-megawatt GE gas-turbine plant in Wisconsin from which it will buy power. The Wisconsin ntility is also looking into building new transmis- sion lines to move power into its region Power plant orders also are accelerat- ing because the new turbines are working better. ABB gas turbines which initially cracked at a Wisconsin Electric power plant are now fixed and "bumming along," says Jose DelGado, assistant vice presi- dent of Wisconsin Electric. GE poured enormous engineering re- sources into fixing its F-class turbines, spending $300 million, analysts say. At Vir- ginia Electric & Power Co., where GE F- class turbines had cracked, the units are now "working well,' says senior vice pres- ident Robert Cartwright. $o well, he adds, that the company, a subsidiary of Domin- ion Resources Inc., is now negotiating with GE to buy additional units. FPL Group Inc.'s Florida Power & Light Co., which also had had problems with cracking GE units, also is negotiating to buy more. Some utilities continue to hold off buy- ing. American Electric Power, for exam- ple, isn't planning new Midwest generat- ing plants, a spokesman says. "Uncer- tainty over deregulation and future prices for electricity could make new plants un- profitable," he says. A repeat of the June chaos is unlikely, he maintains, "and we don't want to make business decisions as a panic reaction to a one-time occurrence." Even so, the overall surge in demand is evident in the order books of power-turbine makers. GE, the world's biggest producer, says that in the first nine months of 1998 it won $3.4 billion in gas and steam turbine orders, a 76% increase from a year earlier, As a result, Mr. Nardelli says, GE's U. $. shipments of big E-class and F-class gas turbines are expected to rocket to 125 by 2000 from 25 last year. Siemens, including the newly acquired Westinghouse business, 'says that since llanla says. A Louisville (las sl)okesnlau says that his company has fulfilled "all our commitments." As demand peaked June 25, electricity- slmrt utilities cut power to certain cus- tomers-in some cases for only a few hours, bnt still cansing disrnption. Wiscon- sin Electric Power Co., a unit of Wisconsin Energy Corp., which, in return for lower rates, can remotely control air condition- ers in some residences, turned air condi- tioners off in 25,000 homes. Businesses were hit. In Upper Michigan, Cleveland-Cliffs Inc.'s two huge iron-ore ~nines lost electricity, and operations ceased. In East Liberty, Ohio, Honda Motor Co.'s plant closed for a day, losing produc- tion of nearly 1,000 Honda Civics and Acuras. In Milwaukee, foundries closed. In the Chicagn area, Commonwealth Edison cut power to 300 industrial and commercial cnstomers with "interruptable" contracts, nnder which users get lower rates on condi- tion their power can be turned off. The June crisis, especially the higher costs for purchased power, caused major losses at some utilities. "Our earnings for the year evaporated," says Mr. Reynolds of Illinois Power. The electricity shortage also sparked coml)laints by customers, criticism by state politicians and investigations by state regulators. Seeing declining reserve margins and supply deficits as early as 1997, some power producers already had begun planning new plants. But industry executive say there is no doubt the June crisis acted as a spur. The shortages were "a wake-up call for U.S. utilities," says Bill Meseler, executive vice president of the Tennessee Valley Au- thority, the nation's biggest electricity pro- (lucer. The TVA, he adds, is "keeping the lights on" partly by ordering as many as eight GE gas turbines that it will install at its plants by 2000. Wisconsin Electric recently announced June it has received orders for 50 gas tur- bines, valued at more than $1.1 billion. In the same period last year, combined orders for Siemens and Westinghouse totaled just six gas turbines. Even power deals derailed by the Asian financial crisis aren't halting the upward trend. The declining orders expected in Asia for the next few years, "will be more than offset by the remarkable market revi- talization in North and South America," says Adolf Huttl, president of Siemens's power-generation group in Erlangen, Ger- many. How long the order binge will continue isn't' certain. Mr. Nardelli, the GE power chief, sees a "bubble" of catch-up orders lasting at least two or three years. Other industry experts, including energy consul- tant Mr. Reed, agree. "The survivors of the power lndustry's hard times are now reap- ing the rewards,' Mr. Reed says. The surge In orders will undoubtedly improve the fortunes of turbine makers. Operating earnings of GE's power unit, for example, fell to $758 million after a re- structuring charge last year, but are ex- pected to rebound to $1.3 billion this year, the company says, Analysts say that opel'- ating earnings for GE's power business could climb to $1.8 billion by 2000.