SOURCE: Global Energy Decisions

July 12, 2005 07:20 ET

Wholesale Electric Competition Produced $15 Billion in Savings for Customers in Eastern Power Markets

Study Available Free of Charge via Download

BOULDER, CO -- (MARKET WIRE) -- July 12, 2005 -- Global Energy Decisions, Inc. (Global Energy), a leading provider of software, consulting and data solutions to the energy industry, today released a major study on the impact of wholesale competition in electric power markets titled "Putting Competitive Power Markets to the Test," which concludes that competitive wholesale power markets in the eastern United States and Canada produced at least $15.1 billion in customer savings during 1999-2003 and has resulted in dramatically improved power plant efficiencies nationwide.

"Competition is working to lower costs in wholesale power markets in the Northeast and Midwest," explained Gary L. Hunt, president, Global Energy Advisors, a Global Energy business unit. "Without competition to lower the costs of building and operating power plants, our nation's fuel efficiency would be worse and consumers' fuel and electricity bills would be higher than they currently are. The study results confirm that one of the best ways the nation can save energy and reduce prices is to make competitive wholesale electric markets work."

In March 2005, Global Energy was engaged to perform an independent analysis of wholesale competition at work today to identify and quantify the existing and foreseeable benefits to consumers of competitive electricity markets.

Global Energy used its widely accepted power market simulation software and independent price forecast advisory service to compare two scenarios. The first scenario simulated existing competitive market conditions. The second scenario modeled prices and costs as if competition had not existed; the traditional vertically integrated utility environment was assumed to have continued without any wholesale competition. The results produced $15.1 billion in savings compared to the costs of electricity without competition. The savings resulted from competitive pressures associated with wholesale market operations that minimized fuel expenses, operating and maintenance costs, depreciation and taxes.

"Global Energy found improved performance at power plants operated by traditional utilities, as well as those by competitive generators," said Hunt. "Competitive market forces have changed the way existing power plants are operated, producing substantial improvements in efficiency and cost savings."

The study summarized the following efficiency gains:

--  13% reduction in nuclear plant refueling time since 1999;
--  8% lower nuclear operating & maintenance costs;
--  14% lower coal plant operating & maintenance costs;
--  17% improvement in nuclear plant capacity factors from 1995-2004,
    enough additional energy to supply over 10 million residential households;
--  16% improvement in coal plant capacity factors from 1995-2004, enough
    additional energy to supply near 25 million residential households; and
--  4% improvement in coal plants heat rates since 1999.
    
Global Energy also examined the impact of the recent expansion of the PJM transmission market to include Midwest utilities and found $85.4 million in annualized savings for Eastern Interconnection wholesale customers through reduced transmission seams from combining utility transmission systems into regional transmission organizations (RTOs). "While the majority of the production cost savings derived from the PJM market expansion occurred among PJM members, we also saw production cost savings with non-PJM participants," Hunt said. "Eastern interconnection power market customers, who have traditionally had higher electricity rates, saw real savings by increasing their access to lower cost Midwest generation," Hunt said. "Our study confirmed the 4.2% decline in load-weighted spot market power prices in PJM, as reported by the PJM Market Monitoring Unit earlier this year."

Global Energy's study compared the integration of Commonwealth Edison (ComEd), American Electric Power (AEP) and Dayton Power & Light (DPL) into the PJM Interconnection with a simulated 2004 market case in which ComEd, AEP and DPL did not join PJM.

The sponsors of this Global Energy analysis are BP Energy Company, Constellation Energy, Exelon Corporation, Mirant, NRG Energy, Inc., PSEG Power, Reliant Energy, Shell Trading Gas and Power Company, SUEZ Energy North America and Williams.

The study is available at http://www.globalenergy.com/competitivepower/

About Global Energy: Global Energy provides energy organizations with solutions based on a common framework of software applications, energy markets data, and advisory services to enable energy professionals to forecast electricity pricing and demand, conduct resource planning, perform strategic studies and competitor analysis, manage risk, trade energy and schedule delivery, and optimize generation performance. Based in Boulder, Colo., Global Energy has over 400 customer relationships worldwide with the industry's leading market participants including utilities, investment banks, credit rating agencies, government agencies and portfolio managers . More information about Global Energy is available at www.globalenergy.com.

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