Merchant power firms now 20% of U.S. market

Dec. 5, 2000—Nonutility electric companies are playing an increasingly larger role in the U.S. electricity market.

Merchant generation jumped 70% to 167,357 MW in 1999, or about 20% of total U.S. capacity, compared to 1998, as merchant power producers bought and built power plants to supply growing demand.

Merchant power companies built 8,000 MW of mostly gas-fired capacity in 1999, says the U.S. Energy Information Administration (EIA), just a fraction of the 145,417 MW the industry has announced plans to construct between this year and 2004.

Electric utilities generated 286 billion kw-hr or 77% of the August 2000 total—the latest month for which figures are available—and nonutility power producers generated 85 billion kw-hr or 23% of total generation.

U.S. demand is strongest in the industrial and commercial sectors, new figures show. Total demand in August rose 5% to 371 billion kw-hr, compared to the year earlier period. Sales to the commercial sector were up a robust 9% in August 2000, while sales to the industrial sector rose 7% over August 1999. Sales to the residential sector were flat at 124 billion kw-hr, compared to August 1999

Total U.S. net generation of electricity was up 2% to 2,563 billion kw-hr during the first 8 months of the year. Fossil fuels, primarily coal, accounted for 71% of net generation; followed by nuclear, 22%; and 7% from renewable resources, including hydropower.

At nonutilities, fossil fuels, primarily gas, accounted for 83% of total generation; 11% was from renewables, including hydro; and 6% from nuclear. Nearly, 80% of the new capacity on the drawing boards will be gas-fired, primarily short construction lead time such as gas turbine and combined cycle units, says the EIA.

In July, receipts of gas totaled 322 bcf, down from 367 bcf reported in July 1999. Gas maintained a slight price edge over fuel oil.

The average cost of gas delivered to electric utilities was $4.34/MMbtu, compared to $2.51/MMbtu reported in July 1999, the EIA said. The average delivered cost of fuel oil in July 2000 was $4.40/MMbtu, up from $2.68/MMbtu reported in July 1999.

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