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U.S. reserve margins expected to peak in 2004 as supply expansion continues


Arlington, VA, April 11, 2002 — Energy Ventures Analysis Inc. (EVA) has launched a new report that tracks the impact of the boom of new power plant capacity on U.S. and regional power markets.

The report, released Thursday, finds that U.S. reserve margins likely will peak starting in 2004 at a robust 37 percent as supplies outstrip demand nationwide. At the regional level, however, a much more varied result was found.

The boom of new power projects grew from just a few regions and spread unevenly throughout the country,” observed A. Michael Schaal, Senior Analyst for EVA.

“A few regions only recently attracted the interest of developer’s just before the current crunch in new power plant financing. Those regions have a high proportion of capacity that is vulnerable to cancellation or delays. Our analysis not only provides a baseline reserve margin forecast for each region, but also provides a range of potential reserve margins that is based on varying levels of pre-construction capacity being built. Using this regional approach provided us with a view of which regions appear to be over-built, which region are at-risk and in which regions the outlook is highly uncertain,” concluded Schaal.

The report, U.S. Reserve Margins, April 2002, tracks the year-by-year expected excess capacity over demand on a regional basis. Historically, electric utilities added new capacity as needed to maintain a target margin, usually 15 to 20 percent.

In the past, these reserve margin targets were considered prudent to ensure the reliable delivery of power. In more recent times the balance between capacity and demand has also become a commercial concern in that power price spikes or market over saturation can be detrimental to consumers, while market over-saturation can adversely impact merchant developers.

U.S. Reserve Margins, April 2002, can be purchased by contacting A. Michael Schaal at EVA, or on the internet through EVA’s collaboration with economy.com at www.economy.com/research.

The North American Electric Reliability Council (NERC) has selected EVA to track new power plants. EVA’s CCGT database used by NERC is the same as used in the report, Tracking the Boom of New Power Plants in the U.S., March 2002. Further details are available at the EVA website or the NERC website, www.nerc.com.

About EVA: Energy Ventures Analysis, Inc. (EVA) is an energy industry consulting firm based in Arlington, Virginia. Over the past 25 years, EVA has developed a national reputation in the electric, gas, coal, oil, utility, and environmental fields. EVA studies have been used for corporate strategies, Public Utility Commission proceedings, court testimony, Congressional hearings, governmental rulemaking, and energy conferences. EVA offers a wide-range of economics and technical services in the energy and environmental areas.