Electric rates unaffected by Gulf crisis for now: BG&E

September 11, 1990|By Frank D. Roylance | Frank D. Roylance,Evening Sun Staff

Local power company officials say they can foresee little if any immediate impact on electric rates from the Persian Gulf crisis.

Although crude oil prices have climbed nearly $7 a barrel, or 30 percent, since the Iraqi army invaded oil-rich Kuwait on Aug. 2, officials at the Baltimore Gas & Electric Co. say several factors should cushion electricity consumers for "the foreseeable future."

*Since the oil crises of the 1970s, the utility has curbed its reliance on oil as a fuel to spin electrical generators.

Although oil-fired turbines make up nearly a quarter of BG&E's total generating capacity, "for the first half of 1990, we had less than 10 percent of our generation from oil-fired plants," said BG&E spokesman John A. Metzger.

Because it is usually cheaper to use generators powered by coal, gas or nuclear fuels, "oil is always the fuel of least choice," he said. During off-peak periods, the oil-fired power plants are usually idle.

*For now, the region is entering a period between the heating and cooling seasons, when the demand for power is relatively low, and therefore the need to use the oil-fired turbines is slight. Cold weather will change the picture.

*The full impact of rapidly rising oil prices can't be passed along immediately to consumers. The state Public Service Commission requires that BG&E average its fuel costs for the previous three months in calculating the fuel rate surcharge applied each month to consumers' bills. And even then, no fuel cost increases can be passed along until they amount to a net gain of at least 5 percent. So far, they haven't.

*Higher oil prices this summer and fall should be counterbalanced by the restart of one of BG&E's two 825-megawatt nuclear generators at Calvert Cliffs.

The nuclear generators produce BG&E's cheapest electricity. Since their shutdown last year for mechanical and safety problems, BG&E says its fuel rate has increased almost 42 percent, costing the typical residential consumer (using 600 kilowatt hours) an extra $3.85 a month.

The utility is still predicting the restart of one unit at Calvert Cliffs within the next two weeks, which should ease pressure to raise the fuel rate.

For these reasons, Metzger said, "We do not, in the foreseeable future, expect oil price increases, in and of themselves, to trigger an increase in the fuel rate."

However, Metzger acknowledged that, further down the road, other factors in the complex tangle of influences on fuel costs could influence utility bills in unpredictable ways.

"We can't project to the heating season," he said. A cold winter could force the utility to burn larger quantities of oil.

Although only 20 percent of BG&E's oil supplies came from the Persian Gulf, the price of oil from non-Gulf sources, including domestic production, still goes up when worldwide supplies are down. While Saudi Arabia, Venezuela and other big producers ** have promised to pump more oil to replace the embargoed Iraqi and Kuwaiti oil, the overall picture is "too iffy," Metzger said, for predictions beyond a month or two.

The inaccessibility of Kuwaiti refineries, for example, is aggravating a worldwide shortage of refining capacity, which threatens to push fuel oil prices higher this winter even if there is plenty of crude oil around.

A scarcity of fuel oil would force utilities worldwide to turn to alternative fuels, and that "would exert pressure on price of other fuels," making them more costly, Metzger said.

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