The California Energy Commission is holding its breath hoping that supplies will last through the summer. Under normal conditions, the state should be fine. But if temperatures soar, resources will be strained, the CEC forecasts in a June 3 report. In addition, the Los Angeles Department of Water & Power says demand in its current 2003-04 fiscal year is up 5 percent over the previous fiscal year. Meanwhile, the National Weather Service forecasts hotter than normal temperatures across the region and possible drought in the Pacific Northwest. A ?larger than expected? economic rebound played a big part in pushing up demand growth to 3.5 percent, according to the CEC. An earlier report on supplies issued by the commission estimated annual growth of 2.6 percent; thus this week?s new forecast. Also, the report noted that California?s hydro generation is about 95 percent of average, and imports from the Pacific Northwest were reduced because of line repairs. If the state sizzles this summer, operating reserves could drop below 7 percent, the grid operator?s existing preferred level, to 5 percent or less, according to the report. While rotating outages are unlikely, there could be ?localized supply disruptions? from extreme conditions or equipment failure. ?It will be tight, but there should be adequate supply,? said Kwin Peterson, spokesperson for the Western Electricity Coordinating Council (WECC). The council?s summer forecast projects a peak power demand of 54,881 MW in the California-Mexico area, which is 3.4 percent above last year?s peak. Peak demand in the Desert Southwest is expected to rise 3.7 percent. Overall, peak demand in the WECC region will be up by just 0.4 percent over last summer. The increased demand this summer unfolds against a backdrop of less hydropower, natural gas prices that remain high, and coal prices that are also rising. ?We are having a low water year,? said Bill Murlin, spokesperson for the Bonneville Power Administration, which sells surplus power to California. ?Our water supply forecast shows our flow will be about 81 percent of normal.? The weather in the Pacific Northwest has been dry since January. In addition, hotter than normal temperatures this spring have melted snow earlier than normal, which will diminish flows later this summer. Despite the condition, Murlin said that the federal agency expects to be able to meet its contractual obligations, though it will have less surplus power to sell. Pacific Gas & Electric?s hydropower generating areas have seen precipitation that is some 10 to 20 percent below normal, but its dams are nearly full, said Jon Tremayne, a spokesperson for the utility. Last year, PG&E sold about 70,000 gigawatt-hours of power. It generated about 11,000 GWh of hydro power. ?Both gas and power [prices] are up,? said Manuel Robledo, energy systems manager for the Southern California Public Power Authority. Gas prices, he said, have remained ?strong? at the Southern California Border, running at $5.84\/MMBtu last month. Daily power prices in May were up 25 percent peak and 31 percent off-peak compared to April, reflecting a normal seasonal increase in demand, but also high gas prices. Coal prices have risen on the spot market, yet coal may be the least expensive alternative for power supplies this summer. Most of the plants in the Desert Southwest that supply Southern California have long-term coal contracts so are unaffected by the recent price increases, said Robledo. Coal actually has dropped in price at the San Juan Power Station in New Mexico, which supplies many public power agencies in Southern California, because of changes in mining operations, according to Public Service Company of New Mexico, which operates the facility. Nationally, coal prices have risen in response to high gas and oil prices and greater demand abroad, particularly in China. Spot prices for Utah coal are up from around $20\/ton at the beginning of the year to over $25\/ton, according to the Energy Information Administration.