Academic journal article Forum for Applied Research and Public Policy

Electricity: Lifeline or Bottom Line?

Academic journal article Forum for Applied Research and Public Policy

Electricity: Lifeline or Bottom Line?

Article excerpt

If we're not careful, the benefits of competition may be overshadowed by a loss of reliability.

On a blistering day last July, two large cables at a Chicago substation failed, triggering a local blackout that sent hundreds of air-conditioning deprived residents to hospitals and a few, tragically, to cemeteries. At its worst, the blackout left more than 100,000 people without electricity, and thousands remained that way for the better part of three days.

This was only one in a string of blackouts during the summer of 1999 that afflicted hundreds of thousands in New York City, Long Island, New Jersey, the Delmarva Peninsula, and four Gulf states. And the problems were not confined to local power companies; several high-voltage transmission systems--designed to deliver vast amounts of power over great distances in all sorts of weather-- strained to keep up with demand. Over the course of five tense weeks, two other blackouts hit Chicago while other electric systems suffered with voltage problems and a few teetered on the brink of collapse.

What's happening here? Why is the world's strongest, most reliable electric grid scrambling to keep up with hot, but not unprecedented, summer weather? And why is it hard for some transmission operators to make eye contact when asked about the prospects for this summer? The reasons are complex, and agreement is lacking, but many point to the pressures competition is placing on an industry still learning how to compete. In short, the move to restructure the electric utility industry has the industry sprinting toward competition before it can walk. As a consequence, the long-sacred focus on reliability is beginning to blur. Instead of filling its traditional role as a lifeline, electricity is in danger of becoming just a bottom line.

Lights Out

Blackouts--small or large--are nothing new; but the reasons for some of last summer's blackouts and near misses are disturbing. For example, the U.S. Department of Energy cited Chicago's Commonwealth Edison for scrimping on its substation maintenance budget--which went from a high of $47 million in 1991 to just $15 million in 1998--as it shifted money into its nuclear program and preparations for competition. [1] Other systems, including TVA's, were threatened when operators were unable to predict the massive amounts of power flowing across their systems from eager new sellers on one side to eager new buyers on the other.

Unless transmission operators understand exactly where and when power will flow across their systems, lines that are already overburdened by severe weather can fail, triggering widespread disruptions. Looking at the blackouts of 1999, DOE concluded that "... the necessary operating practices, regulatory policies and technological tools for dealing with the changes [resulting from a restructured environment] are not yet in place to assure an acceptable level of reliability." [2]

Energy Secretary Bill Richardson and Federal Energy Regulatory Commission Chairman James Hoecker have warned of more blackouts this summer, and Richardson criticized policymakers who "haven't kept pace with the rapid changes in the electric utility industry." [3] While many would welcome legislation to ensure reliability, the industry desperately needs something more--time. Unless the industry has time to strengthen the grid, time to understand the new pressures that competitive pricing brings, and time to develop the complex computer modeling and analytical tools needed to safely manage the phenomenal increase in electricity transactions, many fear the grid may be headed for the most severe outages since the New York blackout of 1965. The Electric Power Research Institute estimates that power failures in the United States cost the economy approximately $50 billion per year.

The World's Largest Machine

Someone once called the North American electric grid--the massive conglomeration of generators, wires, switches, breakers, and related equipment that produces and moves electricity to almost every point on the continent--the world's largest machine. …

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