Nov. 12--Princeton Electric Plant Board General Manager John Humphries was meeting with the local industrial board earlier this month about a possible new business park tenant when the town briefly went dark. "It turned out that TVA, which has only one line into Princeton, made a switching error," Humphries said. "We need a more reliable power supply that has normal and alternative feeds." Princeton Electric will pull out of its Tennessee Valley Authority contract when it ends in late 2009 in favor of investing in the $2.5 billion Prairie State Energy Campus plant to be open near Carbondale, Ill., in 2010 or 2011.

That venture will supply cheaper electricity for many years and ensure that another line is built, linking the town with Kentucky Utilities, he said. "Sixty percent of our load is industrial," Humphries said. "We're a small town but have several factories. People don't work when the power is off." A 2005 Kentucky Public Service Commission study showed that Kentucky power companies "are adequately planning to serve the needs of their customers through 2025." Peak demand is expected to grow to an average rate of 1.7 percent, requiring about 7,000 megawatts of additional generation by 2025 to maintain an adequate supply, the report said.

"The bottom line from a national, regional and state perspective is we're going to need more generation," PSC spokesman Andrew Melnykovych said. "We in Kentucky are in a little bit better shape than a lot of places." Nationwide, transmission systems and power plants aren't being built fast enough to meet America's increasing demand for electricity. Research by Federal Bank of St. Louis economist Kevin Kliesen shows that: --About 10,000 miles of high-voltage lines will be added in the U.S. between 2005 and 2014, a growth rate of only 0.6 percent. Meanwhile, power sales are projected to increase by 1.75 percent annually.

--Generating capacity needs to increase by 347 billion watts from 2005 to 2030, but 54 percent of that won't come until 2021 to 2030. Some economists doubt that supply is keeping pace, potentially increasing the risk of supply disruptions. "I foresee a capacity shortfall in about 2010 or 2012, and that's about the time Prairie State will come on line," Paducah Power System General Manager Dave Clark said. "We think we're going to have our power distribution in good shape in about five years, cost-wise and supply-wise." PPS, which also will depart TVA in 2009, has joined Princeton Electric and other utilities investing in Prairie State, a 1,600-megawatt coal-fired plant co-owned by Peabody and CMS energy corporations.

Clark said Prairie State should ensure long-term supply at rates cheaper than TVA, but he worries most about transmission. Deregulation caused many companies not to expand grids out of fear that competitors would "cherry pick" their more lucrative industrial and commercial customers, he said. Deregulation also made power firms hesitant to invest in expensive plants and lines without long-term supply contracts, said Ken Breeden, TVA executive vice president for customer resources. He said the cost of meeting increasingly stricter clean-air laws also has hindered construction. Breeden said most of the newer power plants are natural gas-fired, built during the past 15 years before gas prices soared and used only to produce power during heavy-use periods.

Only six of TVA's 158 distributors in seven southeastern states have given notices of seeking power elsewhere, and Breeden said he is unaware of any others who want to leave. He said having contracts with that many companies helps TVA's long-term planning. "Some people call it a monopoly," he said. "I call it a relationship allowing us to hedge our investment position. We can make decisions for large base-load investments because we know customers will be there to pay for it." TVA will restart a mothballed unit at its Browns Ferry Nuclear Plant in Alabama next spring, reflecting a 2002 decision by the previous board of directors, Breeden said.

"With today's gas prices, that was an incredibly good decision." The unit will generate enough power to supply 650,000 homes. TVA generation in 2008 will be 53 percent coal-fired, 40 percent from hydroelectric and nuclear, and 7 percent from natural gas. Reliance on gas-driven electricity is much greater than that nationwide, he said. "The peak of the TVA system is just slightly over 32,000 megawatts, and we're asking now what that will look like when we get to 40,000," Breeden said, adding that the mix of various types of power plants will be adjusted based on that planning. Nuclear plants cost the most to build but have the cheapest fuel, he said.

The opposite is true of gas, and coal is somewhere in the middle. Ninety-five percent of Kentucky's power is coal-fired, and the state has the lowest electricity costs in the nation. In 2005, the average retail rate was 4.47 cents per kilowatt-hour, 40 percent below the national average rate of 7.52 cents. The PSC study cited uncertainties that could affect Kentucky's long-term ability to ensure those low rates. Among the concerns are federal policies regarding the development of regional electricity markets and air-emission standards -- factors affecting coal production and the price of coal.

Transmission requirements elsewhere in the nation threaten to diminish Kentucky's control of plants built and paid for by its own customers, the PSC said. Paducah-based Jackson Purchase Electric Corp. -- which has the second- or third-lowest rates statewide -- is able to offer cheap power because its supplier, Big Rivers Electric, hasn't had to invest in a plant since 1983, said JPEC President/CEO Kelly Nuckols. "We're very concerned with the supply-demand issue because at some point in time it means we're facing building a new generation plant." Because a new plant will cost three or four times as much as one built two decades ago, "everybody's rates are going to be impacted by that," he said.

Power company officials are generating a supply-demand white paper to participate in a summit meeting later this month with officials of the Governor's Office of Energy Policy, he said. Factors behind increased power use Bigger, cooler homes -- From 1970 to 2004, the average new home increased from 1,500 to 2,350 square feet, and the percentage of new homes with central air conditioning rose from 34 to 90 percent. Computer use -- One large call center reportedly uses enough electricity to power a city of 30,000 to 40,000 people. -- Source: Federal Reserve Bank, St. Louis