Illinois is likely to face a California-style electric power crunch in the next three to five years if the state does not continue to build new power plants, John Rowe, co-chairman of Exelon Corp., Commonwealth Edison Co.’s parent, said Thursday.
The greatest need for new power plants is in the area north and northwest of Chicago, Rowe said. And the cheapest place to build them, he added, is where a natural gas pipeline intersects with an electric transmission line.
“We have real margins of safety now for the next three to five years,” Rowe said in an interview. “But if we don’t continue to build new plants we won’t have the capability to meet the need.”
The failure to keep pace with the need for new plants could complicate Illinois’ phased-in deregulation process, which is swirling with questions about how–and how quickly– the wholesale and retail electricity market will develop.
“It could be a big disaster,” Rowe said of the state’s electricity deregulation plan. “It obviously is in California. But in most areas, a competitive marketplace has done a better job in supplying customers with the commodities they want, at efficient prices, than a regulated monopoly.”
A prime area of concern is that the deregulated marketplace no longer will have one central body, such as the Illinois Commerce Commission, overseeing regional and statewide questions such as whether there is enough generating capacity to meet residential consumer and industrial needs, Rowe said.
“That’s to some extent a loss,” Rowe said. “But neither utilities nor governments were entirely successful in planning for the region. We got to keep an eye on these things and keep talking to each other.”
Of course, in the brave new world of deregulation, there is no guarantee that the power from any new plants will go to Illinois customers. Under the deregulation plan approved by the state legislature, utilities in the future will be able to sell power anywhere they can move it and it will likely flow to the highest-priced market.
Rowe said he also is concerned that “because of the mess in California, the ICC will want to extend ComEd’s responsibility to be the electricity provider” of last resort.
“On the one hand, we are supposed to help encourage the development of the wholesale market,” Rowe said. “On the other hand, we still have the responsibility to supply all the customers, if they want us to. If people want the wholesale market to develop to its fullest, they can’t rely on us to supply everyone.”
In Illinois, current electric generating capacity is more than 35,000 megawatts, or 35 million kilowatts, said Larry Leonard, Exelon’s director of energy acquisitions.
“We’ve had a progressive attitude in Illinois towards developing new generating capacity,” Leonard said. “The state has balanced the need for more plants with the need to protect the environment and conserve energy.”
Rowe agreed that Illinois was unlikely to make the mistake of California, which has not built a new power plant in more than a decade.
“They didn’t build, then they didn’t build, then they didn’t develop more transmission lines,” Rowe said.
Illinois, by contrast, will bring online 3,000 megawatts of new generating capacity this year in the form of peaker plants, Rowe said.
“With our nuclear fleet and the coal capacity that we sold to Edison International–10,000 megawatts–there’s more than enough power now in northern Illinois, most hours of the year,” Rowe said.
Midwest Generation, a subsidiary of Edison International, bought seven Illinois fossil-fuel electric generating plants and five peaking units from ComEd in 1999 for $4.8 billion.
Aside from building new plants, power generators are focusing on increasing capacity through improved operations. Midwest Generation this week said it had increased capacity by 12 percent at the former ComEd coal plants through efficiencies.
Exelon this year will increase the output of its 17 nuclear power plants, 10 of them in Illinois, by 1,000 megawatts, through upgrades and efficiencies, said Exelon spokesman Don Kirchoffner.
Power also is available fairly cheaply in the Midwest wholesale market, Rowe said.
Rowe anticipates that most of the need for additional electric generating capacity could be met by new peaker plants, which are smaller natural-gas fired plants that are brought online only to meet peak generating needs that typically occur on the hottest days of summer.
ComEd’s peak summer load two years ago was around 21,500 megawatts, and that was after ComEd interrupted power to some customers who had signed on for interruptible rates.
For summer 2001, ComEd is planning for a peak load of 23,600 megawatts, Rowe said.
But on a typical day, he said, ComEd’s load is between 10,000 and 16,000 megwatts, or less than 60 percent of what it would be on the hottest summer day.
“We need much more power for a few hundred hours than we need for 8,760 hours a year,” he said.
But he also said that Illinois needed additional midrange capacity, which he thinks could be best supplied by a natural gas combined cycle plant, one of the most efficient new technologies available.
