12/11/2001 Associated Press Newswires Copyright 2001. The Associated Press. All Rights Reserved.

PORTLAND, Ore. (AP) - A study presented to the Northwest Power Planning Council on Tuesday suggests the West is headed toward repeated boom-and-bust cycles of high power prices followed by overbuilt plant capacity unless somebody steps in to break the cycle.

"We've turned electricity into a commodity, and all commodities have a pattern of boom and bust," said Andrew Ford, a Washington State University environmental science professor.

But unlike commodities such as pork bellies, aluminum or grain, electricity cannot be stored - meaning the immediate supply is fixed at a certain level no matter how much demand increases - until new plants are built.

The result, Ford said, was the soaring wholesale electricity price rates across the West last year when electricity demand increased during a drought that reduced hydroelectric generating capacity at the same time that investors and utilities had delayed construction to see whether deregulation would bring higher prices.

California suffered more problems than other states, including rolling blackouts and huge jumps in residential electric rates in some areas, such as San Diego. Much of it was blamed on the lack of new generating capacity.

"I resist the effort to blame it on market confusion because there's always confusion," Ford said. "The answer is really simple - it wasn't profitable to be building new plants at the time."

He compared the deregulated utility industry to the real estate market in Chicago, which was studied extensively beginning in 1933 to determine why it went through repeated boom-bust cycles.

The conclusion was that rising property prices kept pushing new construction until the market collapsed, with projects still under way. Real estate developers had to wait years to recover losses while rents and property prices remained depressed, until demand increased and the same cycle began all over again.

Ford noted the utility industry is much like the real estate market because it has long lead times for construction requiring extensive government permits, depends a great deal on mass behavior and cannot quickly adjust to changes in demand.

"If the electric power industry does turn out to be like the real estate industry, it's going to be a disaster," said Tom Karier of Spokane, Wash., a power council member and chairman of its power committee. "This study shows a striking similarity, and we cannot afford the social costs," Karier said.

The Portland-based council was created by Congress with the Northwest Power Act of 1980 to balance regional energy needs with fish and wildlife conservation in Oregon, Idaho, Montana and Washington. It has two members from each state who try to find ways to guarantee reliable energy at the lowest economic and environmental cost.

The report Ford made to Karier and the power committee on Tuesday was part of a computer model of power plant construction patterns he developed for the California Energy Commission.

Ford said the model shows ways to avoid the boom-bust cycle, but it likely will mean a return to strict regulation or very effective cooperation among competitors in the private market.

"People who say we can have both are probably fooling themselves," Ford said.