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Power Demand Forecast in Urgent Need

The power industry is undergoing a transformation to become more efficient and competitive. The 1992 National Energy Policy Act breaks the regional utilities' monopoly over the market of their respective service areas. The open access to transmission lines promotes competition from all parties across the country on an equal basis. Utilities are under more pressure in maintaining their profit margins. Measures to control cost are becoming more important and must be sought by every power producer in order to survive in the upcoming deregulated environment.

Electricity became a commodity in early 1996 when electricity futures trading began on New York Mercantile Exchange. The number of power marketers and brokers keeps increasing every day, who need all kind of information about electricity in order to make intelligent trading decisions.

The electricity futures price has been fluctuating violently ever since the first day of its trading. Among the many reasons for this fluctuation is the fact that the demand for electricity has a strong seasonal cycle, and the cycle is driven by summer and winter temperatures. Since weather often deviates from its normal level, electricity demand tends to differ from its normal level too, which causes unexpected movement in futures price.

The following news item exemplifies the above point.

NYMEX Electric Traders Learn About Weather

LCG, June 25, 1996--Traders in electricity futures on the New York Mercantile Exchange, especially those with backgrounds in other commodities or investment securities, are learning to keep an eye on the weather as they buy and sell short-term contracts on the NYMEX. And weather isn't the only uncertainty that differentiates power from pork bellies.

At the end of last week, prices closed lower because of selling caused by moderating temperatures in parts of the West. Forecasts for this week of cooler-than-normal weather from western Utah, through Nevada, to the northern two-thirds of California cooled market sentiment, traders said. But hot weather in the Southwest firmed prices there.

Then there are outages--two regional generation shutdowns at a hydroelectric plant raised physical market prices in New Mexico and two at Wyoming steam units boosted prices at Four Corners.

This online service - Weather and Electricity Demand Forecast for Power Professionals - has been created to meet the needs of utility managers, power marketers, power traders, and other power-related professionals: To forecast future demand and review past consumption.

The service provided here is the result of an extensive research by Climaton Research Co. into the quantitative relationship between electricity demand and the weather. Here you can find:

  • Daily high and low temperature forecast for the next 7 days over the entire U.S., nine geographical regions, 48 individual states, and the service areas of major power companies.
  • Forecast of daily electricity demand for the above areas.
We strive to achieve these objectives and better serve you - the power professionals.
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