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ICF Consulting Study Predicts Turning Point
in Wholesale Power Markets
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FAIRFAX, VA, April 4, 2001 - ICF Consulting recently
completed the Fourth Edition of its Bulk Power Outlook subscription
study, which concludes that the outlook for the wholesale power
markets is at a turning point. After years of generation capacity
shortages, the number of new plants under construction promises
an end to shortages in one to three years in practically every
U.S. regional power market.
ICF Consulting does not believe this turning point will occur
everywhere at the same time. California, other western states,
and some other markets face potentially serious shortages this
summer. "California faces potentially severe problems this summer,"
says Judah Rose, managing director of ICF Consulting's wholesale
power practice. "However, even California can expect to be in
balance within three years and prices will moderate and extreme
price spikes will occur less frequently. Also, we are very concerned
about New York City for this summer."
ICF Consulting's previous three editions of Bulk Power Outlook
strenuously warned that the lack of construction would result
in extremely high prices reaching thousands of dollars per MWh.
"Since 1995, we advised everyone to develop generation and/or
secure it, even peaking facilities, because prices were going
to skyrocket," says Rose. "At the time, ICF Consulting was the
only entity to anticipate correctly the current high prices
and shortages. Today a different approach is needed."
Using the same ICF Consulting IPM™ power model from previous
studies, this Outlook predicts that the current level
of plant construction is enough to solve shortages. Since construction
takes two to three years, relief will not be available this
summer. In a few markets, construction is more than sufficient,
e.g., ERCOT (Texas). "Regulators, consumers, and producers need
to be sensitive to current difficulties and base decisions on
future developments," says Rose. "Moderating oil and gas prices
over the same period also will help lower power prices. In addition,
a return to normal hydro conditions by 2002 will further reinforce
the effects of new plant construction."
The implications of this change in wholesale market conditions
are far ranging. First, regulators can expect market conditions
to be more supportive of deregulation, especially if they facilitate
private-sector initiative. Second, power plant developers will
need to be more selective. Third, unregulated retail sales will
be more feasible, reversing a trend of significant problems
in developing retail businesses. "Our findings are not that
markets don't work but rather they don't work perfectly, especially
when barriers combine with lack of experience. We can clearly
see a powerful market response to four years of high prices,"
Rose concludes.
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ICF International (Nasdaq: ICFI) partners with government and commercial clients to deliver consulting services and technology solutions in the energy, environment, transportation, social programs, defense, and homeland security markets. The firm combines passion for its work with industry expertise and innovative analytics to produce compelling results throughout the entire program life cycle, from analysis and design through implementation and improvement. Since 1969, ICF has been serving government at all levels, major corporations, and multilateral institutions. More than 1,800 employees serve these clients worldwide. ICF’s Web site is http://www.icfi.com.
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For Immediate Release
Contact: Douglas Beck
1.703.934.3820
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