Analysts warn of power-rate shock --Summer prices will be 'nutsy high'

Edmonton, AB. -- -

Edmonton, AB. -- Summer is coming and so are scorchingly high electricity rates, analysts warned the Building Owners & Managers Association in Edmonton recently. "We're going to see nutsy high prices this summer," said Andre Templeton, a manager at Enron Canada Corp., the world's largest gas marketing firm. Power rates peaked in December, driving the average 2000 wholesale spot price to $133.22 per mWh, a three-fold increase over 1999. Since then, warm weather combined with power from a couple of generating units that are back on line after maintenance have pushed down prices. "What you're seeing this month (lower spot market prices) -- don't hang your hat on it," said Chris Vilcsak, a consultant at Solution 105 Consulting Ltd. "We've got some tough times coming." There are numerous reasons for the gloom, said Templeton. Many coal-powered generators -- producing about two-thirds of the province's electricity -- are aging. TransAlta's Wabamun unit went down with a cracked boiler last year and other old equipment will fail one of these days. "Fifty-year-old things tend to break," said Templeton.

Water runoff in the Pacific Northwest, including British Columbia, has also been at record low levels. That raises the possibility that Alberta will not be able to get the 800 MW of power it depends on from B.C. Hydro to cover demand during peak consumption hours. In addition, energy-starved California will bid for the same scarce electricity, Vilcsak said. Natural gas is increasingly the fuel that determines North American electricity pricing, and gas storage levels in Canada and the U.S. are very low, added Martin Molyneaux, managing director of FirstEnergy Capital Corp. That suggests continuing high gas prices for the next year or two. Various companies have announced power proposals in recent months, including Epcor and TransAlta, both in the Wabamun Lake region. "I'll bet you a million dollars they won't all be built," Templeton predicted.

The news was not good for the members of the Building Owners & Managers Association at the session. They are already struggling with high energy costs. Peter Molnar of Alberta Blue Cross said that institution's two Edmonton buildings faced a $40,000-a-month increase in power rates Jan. 1. A government rebate program subtracts $12,000 from the bill, Molnar said. But it's a shock to the budget set in September. Rod Wales of O&Y Enterprise said the power bill for his 13-storey building at 9925 109th St. has jumped from $29,000 to $75,000, even with an $18,000 provincial credit. Randy Ferguson, Oxford Properties Group vice-president, decided to lock in costs in anticipation of a rough road ahead. With 1.35 million square metres of office space in Alberta and 170 Edmonton tenants in seven buildings, Oxford is finalizing a 10-year contract with Epcor after a seven-month, $150,000 study of options. Several members of the building owners association expressed frustration there are so few contract choices. Wales said he called marketers for quotes but only Epcor responded. Enron's Templeton said his Calgary team handles contracts for building managers, but Wales said Enron did not reply to his inquiry. "This notion that there is competition out there is a myth," Wales said.