U Ideas of General Interest -- October 2000University of Illinois at Urbana-Champaign
Contact: Mark Reutter, Business & Law Editor (217) 333-0568; [email protected]
POWER FAILURESIllinois should act now to increase production of electricity, expert says
CHAMPAIGN, Ill. -- Illinois needs to expand its production of electricity to avoid the kind of price shocks that tripled electric bills in parts of California this summer, a University of Illinois energy expert says.
"We should not wait for a crisis to come before Gov. Ryan and other officials get involved in this matter," said George Gross, a UI engineering professor who specializes in power networks. The state has been increasing its electricity usage by about 4 percent a year in the 1990s. "That's more than double the average yearly increases in the 1970s and 1980s, yet there has been no significant increase in megawatt production," Gross said.
The margin reserve for the Mid-America Interconnected Network, which includes Illinois, was 11.9 percent on the peak day of 1998, down from a 17 percent margin in 1996. "If a unit fails or is out of service for maintenance, the network must rely on imports from surrounding regions or cut loads."
California, faced with a greater mismatch between surging demand and limited supply, has relied on price caps of wholesale electricity to keep down residential bills. Caps are at best a short-term fix, Gross said, because they discourage private investment in the industry.
The long-term answer is to increase the supply of electricity with new power plants and transmission lines, which, he stressed, must be carefully located to minimize environmental harm. All this requires political leadership, Gross said, because few communities want power plants or transmission towers in their back yards. But given the time it takes to build electrical infrastructure, delays in tackling the issue will only harm the state's economy as it hurts the consumer's pocketbook.
Restructuring of the Illinois electrical industry, started in 1997, is now entering a stage in which prices are liable to become volatile. The law lets industrial users select their own power supplier after Dec. 31, 2000. Residential consumers will have a choice of suppliers after May 1, 2002.
The legislation ends the practice of giving a utility a service-territory monopoly in return for state regulation of the company's price, service and production.
Gross acknowledged that residential electricity bills in Illinois have been fairly stable since 1997. But after 2002, electric companies will be largely free to establish rates according to market demand, which, if the usage trend continues, will mean a very tight energy market.
"Even today, Illinois is importing power from as far away as Pennsylvania," Gross said. Once restructuring is in place, there could be sharp price spikes as well as rolling blackouts.
Unlike most commodities, electricity cannot be stored until it is needed. "The test of any network is its ability to handle peak loads that inevitably take place during a summer heat wave," Gross said. "Illinois had a cool summer this year. Whether it will be as fortunate next year is anybody's guess."
-mr-
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