The power and natural gas industry will face serious supply problems within three years if it cannot draw new money from capital markets, the head of the Federal Energy Regulatory Commission said on Monday.
"If we live in the world that we've been in for the past 18 months with the unavailability of credit at almost any price ... then we're going to be in a real (mess) in about another 18 months to three years," FERC chairman Pat Wood told a news conference here.
Power and gas companies have been hard hit over the past year by a series of credit downgrades and higher trading costs that have limited their ability to mitigate financial risks in the derivatives markets.
That, in turn, has sharply curtailed investments in new power plants, power lines and gas pipelines, Wood said.
"We're living off investments that were made in the past 10 years," he said.
Power plants typically take about three years to bring on line including the time needed for financing, permits and construction. That timeframe is about two years for gas pipelines and five years for power lines.
Most regions of the country are currently well supplied by the energy infrastructure, he said, but new investments are not being made.
"We're OK today but it's just not a real long-term OK unless we get the capital coming back in the front door," he said.
"One good hot summer or cold winter and two years from now that (infrastructure's) really going to be stressed to the max," he added.
Wood was in Houston to address a closed-door meeting of 31 energy executives at a forum held by the University of Houston's Bauer College.
The main issues up for discussion centered on restoring confidence to a sector that has been battered by the 2000-2001 California energy crisis, the collapse of Enron Corp. ((ENRNQ.PK)) in late 2001, and subsequent erosion of corporate market value amid credit woes.
A survey of 25 energy executives by Bauer College showed half were less positive about the state of nation's push to deregulate its electricity market than they were a year ago, according to Craig Pirrong, finance professor and director of energy markets at Bauer College.
Nearly two-thirds of the executives did not expect the industry to emerge from its credit ratings crisis before the second half of 2004.
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