Sunday, July 23, 2006 | 7:41 a.m.
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This summer looks to be among the hottest on record, but the sweat from those who are buying energy to keep air conditioners humming isn't because of the heat.
Energy retailers such as Nevada Power Co. are working with slim reserves in an effort to meet swelling demand as the mercury hits new highs, and no one knows that better than its buyers.
Two dozen of them, from four interdependent divisions, work 12-hour shifts around the clock to keep the electricity flowing. The day shift begins at 4:30 a.m., when the buyers look at the latest weather forecasts and other data to gauge the level of demand.
"Sometimes we miss," admits Jeff Hill, Nevada Power's resource procurement executive and top man among the company's energy buyers. And when the utility is caught short, pulse rates shoot up.
"It can be anything from a very calm day to a day of panic where you're scrambling to get every megawatt you can," he says. One key factor affecting buyers' stress levels is simple: the weather.
If it's cooler than forecast or overcast, they have some room to maneuver. Hotter, and the buyers have to look to the short-term markets.
And with the nation - and particularly the West - sweltering this summer, Nevada Power can be competing with other utilities for a limited supply of electricity.
When the company has ordered too much, it will try to sell the excess energy to another supplier. An alternative is to throttle back Nevada Power's own generating units.
The utility emphasizes that its employees are energy buyers, not traders. Unlike firms such as the late, unlamented Enron, Nevada Power sells electricity only when it has too much, not to make a profit. Traders work in places such as Houston, not Las Vegas, Hill notes.
Just keeping the electricity on in Southern Nevada is a job that keeps getting tougher. Last week, the company set a record Tuesday afternoon, supplying 5,618 megawatts to metropolitan Las Vegas. The previous record of 5,587 megawatts was set exactly one year earlier.
And days like that can be tough for Nevada Power's energy buyers. The company won't allow journalists or outsiders inside the room where the buyers and planners work.
"It's not a very sexy room," Hill says. There are no blinking lights on a floor-to-ceiling map of Southern Nevada, the company's service area, on the wall. No brokers bark orders into telephones - a scene popularized during the energy scandals of the late 1990s and early 2000s.
"People tend to think of the Enron trading floor," Hill says. "We're just a staid, old, boring utility."
Fifty-five percent to 60 percent of Nevada Power's electricity comes from its own generating stations in Clark County. Most of the rest comes through preset seasonal contracts with independent generating stations such as Reliant's Bighorn station near Primm or Mirant station in Apex.
About 10 percent, 550 megawatts, will come off the grid from other generators during peak seasons.
Hill says nerves can fray when there is not enough, but so far his buyers have always been able to find what they need. On Tuesday the company found itself about 400 megawatts short, but buyers were eventually able to locate and purchase it.
"On a day like that, it's closer to a panic situation," he says before quickly correcting himself that the buyers are more "real nervous" than panicking.
"The main priority is to make sure we can keep the lights on and power on to the customers We have not gotten into a situation. We have been able to obtain everything we need on the open market."
Analysts studying the Western and national power grids say that buying what is needed, here or in other parts of the country, may get more difficult. And although the U.S. grid is described by the industry as among the world's most reliable, it has had notable failures.
In 2001, Southern Nevada joined California in rolling blackouts that at the time were chalked up to lack of capacity, but subsequently were blamed on market manipulation - especially by Houston-based Enron. Federal prosecution of Enron's executives is continuing.
But blackouts have happened since. A huge outage darkened the Northeast in 2003. LaGuardia Airport and other areas in and around New York City struggled this week with blackouts during the area's worst heat wave.
Kwin Peterson, a spokesman for the Western Electricity Coordinating Council, a voluntary association of power retailers throughout the West, says the region's record has been good so far this year. And the problems experienced elsewhere shouldn't happen as long as the industry keeps to reliability standards, he says.
"Then the chances of blackouts are very small," he says. "In the West we really only have the concern about Southern California and they have managed this week to have sufficient reserve. They didn't have any major outages."
Jim Owen, an analyst with the Edison Electric Institute in Washington, D.C., worries about "punishing, smothering demand" he sees growing every year.
"The system has been severely strained from coast to coast," he says. "So far so good, but we have set power demand records. I'm proud the system has held up as well as it has. Is there room for complacency? Absolutely not."
For Owen, and for Nevada Power officials, that means new generating stations and new transmission lines are needed to get the power to the demand. New federal laws that provide mandatory reliability rules, essentially requiring buyers and sellers to comply with their commitments, also will help the system, Owen says.
And even with new power plants and new transmission systems - such as a power plant proposed by Nevada Power for Ely and a 250-mile transmission system to bring the power to Las Vegas - more needs to be done. Owen says customers need to more efficiently use the power that comes to homes and businesses.
"We are going to need more generating capacity, but we also need to use the resources we have more wisely," he says.
The Edison Electric Institute represents the interests of its members, shareholder-owned utilities such as Nevada Power and its parent company, Sierra Pacific Resources. It often finds itself on opposite sides of issues with the Environmental and Energy Study Institute, also in Washington.
But there is no disagreement about the need for more efficient use of electricity.
"If we continue at these kinds of levels of demand, we are going to have to take more steps," says Carol Werner, executive director of the environmental group. She would like to see more efficient appliances, more efficient lighting, more energy-efficient lifestyles.
"It is frankly an economic mistake not to be doing those kinds of things," Werner says. She notes that Southern Nevada's summer demand has grown from 4,500 megawatts to more than 5,600 megawatts in less than a decade. Population growth of 5 percent or 6 percent annually has contributed to energy demand, but so has the proliferation of powered devices in homes and businesses.
"There is enormous potential to increase efficiency. There are opportunities not being seized across the board," she says.
Werner is among those who would like to see Nevada make a greater investment in renewable energy sources such as solar, geothermal and wind: "The whole state should be running on renewables," she says.
Nevada Power, while planning a new, 1,500-megawatt coal plant and additional capacity at its existing, fossil-fuel-powered power plants, has said it also wants to expand its portfolio of renewable resources. Hill says both traditional and renewable elements are needed in an expanded portfolio.
"Clearly, the resource plan we filed recently will go a long way to solving a lot of those issues," he says.
Hill expects that even with new generating capacity coming on line in years to come, energy retailers will still have a tough time satisfying growing demand. Companies serving the desert Southwest have a particularly tough time because of the huge gap between winter and summer demand, a gap that is growing as the West gets hotter in summer.
"That seems to be the pattern we're seeing," he says. "Our summertime load seems to be dramatically increasing. You're seeing a bigger differential."
And Nevada Power's energy buyers may be sweating even more.
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