The Energy Information Administration (EIA) published a chart on its web site last week showing the estimated electric power reserve margin and target for this summer as projected by the National Electric Reliability Council (NERC).
Based on the data, those of us who live in Texas should hope 2012 will not be a repeat of the heat wave that dominated last summer's weather pattern. If we do get a repeat, since the Texas power industry has the lowest reserve margin of any region in the nation at 13% and is not interconnected to the rest of the nation's power grids, it means the Lone Star State might become the "Blackout State" in 2012. Only two other of the 14 regions have reserve margins in the teens.
What is particularly interesting in the map the EIA produced is that the reserve margins estimated by NERC show the three states most at risk of power blackouts happen to be the top three states ranked by population. The nation's fourth most populous state is Florida, which has an estimated reserve margin of 30%.
Already, ERCOT, the power regulation body for Texas, is proposing raising power prices this summer to help shed electric load and thus increase the implied reserve margin to avoid blackouts. If the summer has normal temperatures, Texas should have adequate power supplies, otherwise, residents should prepare for potential blackouts.
G. Allen Brooks is Managing Director of Houston-based investment banking firm Parks Paton Hoepfl & Brown. This article originally appeared in the June 5, 2012, issue of PPHB's newsletter "Musings from the Oil Patch."