Wednesday, October 3, 2012

Utilities could face 'triple whammy' in years ahead, S&P director tells APPA conference

Utilities in markets outside of Ontario (where all the private generators seemingly operate without risk) are being warned of the risks from heavy reliance on currently cheap natural gas generation accompanied by locked-in expensive power purchase agreements for all types of generation.

Utilities could face 'triple whammy' in years ahead, S&P director tells APPA conference:
Utilities generally are finding it cheaper these days to buy power from others than to build generation, he said. A growing share of the electricity available for sale in the open market is produced by burning natural gas, and when utilities do decide to build, their choice is usually a combined-cycle natural gas-fired plant, he said. All this adds up to a heavy reliance on gas.
When meeting with a credit analyst, any utility that relies on natural gas should be ready to discuss its fuel procurement strategies and hedging options, exposure to fuel cost volatility, and its risk management policies, Panger said.

"It used to be that keeping prices low and keeping the power on was what running a public power utility was all about," he said. Today, long-range planning is complicated by environmental regulations, the risk of rising natural gas prices and the weak economy.
Utilities face the potential for a "triple whammy," Panger said:  higher gas prices, high purchased power costs and higher regulatory costs.
The entire article can be read at Public Power Weekly:

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