Marketplace Report: Coping with a U.S. Heat Wave

Much of the United States is suffering from a severe heat wave. Janet Babin of Marketplace talks with Alex Chadwick about how both consumers and utility companies across the country are struggling to keep their cool.


Back now with DAY TO DAY. I'm Alex Chadwick. Well, it's not quite so hot today in parts of the east and Midwest. But in California, whew! Demand for electricity here set records yesterday. They may be broken today. California officials say rolling blackouts are possible. MARKETPLACE's Janet Babin is here. Janet, the thing about electricity and heat like this - is the strain put on these companies costing them more than the profits they're making by selling all this power?

JANET BABIN reporting:

Well, it depends. I mean, electricity generators that can sell on the spot market, that can sell into these markets - they're getting high prices during peak demand periods and they are making money. But, of course, if there is a blackout, no one's going to be making money.

Jerry Yurkowitz(ph) is an analyst with Global Insight. I talked to him about why some parts of the country just continue to struggle with blackouts more than others, and he says the pressure on the grid plays out differently depending on where you live.

Mr. JERRY YURKOWITZ (Analyst, Global Insight): In very, very hot conditions, we don't really have enough generation or transmission capacity to serve certain pockets around the U.S. And when a real peak demand day occurs, we just don't have enough reserves in terms of either generation or transmission imports to serve that peak-day demand.

BABIN: Those pockets include parts of California, Connecticut, Boston, New York, and Ontario, Canada. They're all short on generation compared to their population. And the industry's trying to address that, but of course, that could take years.

CHADWICK: Weren't they supposed to be building more plants after the last rolling blackouts?

(Soundbite of laughter)

BABIN: Yes. Electric companies or energy companies, they did build peaking power plants after the record heat waves of 2000 and 2001. But many of those plants, if you remember, they were built to run on natural gas that at the time was relatively inexpensive. But now natural gas is expensive, so some of those plants are just sitting idle because it would just cost companies too much to run them.

CHADWICK: Well, should Californians expect blackouts today or tomorrow or next week, or at all?

BABIN: Well, the situation, the officials say, is easing up, but when customers conserve energy, it can help. Greg Fishman is with the California Independent Systems Operator, or ISO. And he says customers that heed these power-watch advisories can make a difference.

Mr. GREG FISHMAN (California Independent Systems Operation): Certainly, they make people more aware of our situation, they make people aware that conservation is a good idea. It certainly gets the news media's attention. We've been very busy with that all week long trying to let people know that we're in a tight situation. We know intrinsically that that does result in some reduction in power demand.

BABIN: And later on MARKETPLACE, we could find out how much Katie Couric really makes.

CHADWICK: Well, she's not working in public radio, so best of luck to her. Thank you Janet Babin of Public Radio's daily business show MARKETPLACE, produced by American Public Media.

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