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2009 Saw Historic Power Demand Plunge, FERC Says

Demand for electricity in the U.S. dropped by 4.2% in 2009—the greatest decline in a single year in at least 60 years, the Federal Energy Regulatory Commission (FERC) found in its annual State of the Markets Report, released last week.

The decrease was tagged to a sharp decline in the industrial sector, which hit hard by the recession, the commission said in its report. “As in many of the previous recessions, there was a discernable reduction in industrial demand. Industrial customers used less power than in any year since 1988. Unlike many earlier recessions, residential and commercial demand also fell, about 1% together,” it said.

Demand was also reduced by mild summer weather for most of the country. “Yet, even on the most extreme days, electricity demand failed to approach historic levels,” the commission said. “The primary exception to this characterization was in ERCOT where demand records were broken twice in July in spite of a large decline in Texas industrial demand.”

Power Prices Plunged Nearly 50%

Due to lower demand and lower fuel costs, the regulatory body said wholesale electricity prices also plunged—by almost 50%. In New York Independent System Operator (NYISO) and ISO-New England, the average electricity price in 2009 was the lowest since the markets began in their current form (NYISO in 1999, ISO-NE in 2003). “The majority of the drop in prices is attributable to the drastic declines in fuel prices,” it said. “In addition to lower natural gas prices, spot coal prices declined by over 40% in the East and #2 fuel oil was down 42% in New York.”

Small Effect on New Capacity

The recession had little impact on the amount of capacity coming online because most plants put into service last year would have been too far along to stop construction, FERC said. Still, it noted, new capacity was down 5% from 2008, with some 82 GW cancelled or postponed since the beginning of the recession. “This rate was not out of the norm compared to recent years,” it said.

In 2009, about 25 GW of new generating capacity was put into service, some 84% of which was gas and wind.

Changes in RTO Markets

Meanwhile, FERC staff highlighted several changes at Regional Transmission Organization (RTO) markets. The Midwest Independent Transmission System Operator began its new Ancillary Service Market, which appears to have lowered prices in the region. Additionally, the Southwest Power Pool integrated Nebraska utilities and the Missouri Public Service Commission to add cheaper coal and nuclear to that region in 2009. Finally, the California Independent System Operator launched its new nodal market, where its new product, the congestion revenue right (“CRR”), should combat high congestion costs in the region.

Source: FERC

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