As New York faces the highest electric rates that it has seen in decades, the issue of supply and demand in the utility industry comes into play. Although deregulation is credited (or blamed) for contributing to higher prices in New York supply and demand is at the root of the price increases.
Power plants take considerable time to propose, approve and build, and they are highly political issues. Thus while individuals and politicians may agree that new power plants are needed, no one necessarily wants to build the plants in their community--they are an eyesore and they can (in the case of nuclear plants) be dangerous. Add to the concern of nuclear energy the issue of building environmentally sensitive plants regardless of their technology, and the supply side of the equation remains stagnant, as it has for three decades in New York (although new plants are coming on line in the next few years).
But demand for electricity has also grown at a much higher rate than was predicted by so-called experts decades ago (when decisions about power plants that are coming on line now were made). No one could foresee the incredible increase in electricity demand created by computers and electronic gadgetry, and electricity demand has far outpaced supply as a result. The utility industry in New York (and elsewhere) thus demonstrates what happens when supply and demand do not behave as expected: shortages and price increases occur in the short-term (higher electricity prices) while supply (power plants) is likely to increase in the long-term.
Source: Westchester County Business Journal, March 5, 2001 v40 i10 p18.
Title: Future power production key to open market.(electric utilities
deregulation in New York)(Brief Article)
Full Text COPYRIGHT 2001 Westfair Communications, Inc.
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