Power and chemical plants, telecommunications companies, airlines, railroads and others are, or will be, paying for increased security measures prompted by the Sept. 11 attacks. The higher costs for the regulated industries eventually will become the higher costs for their business partners, communities and customers.
"The magnitude of the total impact on regulated and unregulated industries is unclear because it's so new," says John Mayo, director of Georgetown University's Center for Business and Public Policy. "Security has never been a priority for federal agencies in the past."
Perhaps no industry felt the financial pinch of security as quickly and severely as the airlines. Within days of the attacks, the Federal Aviation Administration required carriers to spend more money on security even as their businesses teetered on the edge of bankruptcy. Recent additions to security requirements have included reinforced cockpit doors, cabin videos and transponders that allow air-traffic controllers to track airplanes with greater precision.
Congress has agreed to spend $100 million to help airlines pay the bill, but analysts warn that the aid won't cover the price tag. "There's no question that our immediate costs will easily surpass $100 million, probably several hundred million," says John Heimlich, research director for the Air Transport Association, which represents major airlines.
Other costs result from the $2.50 security tax on airplane tickets, free seats for federal sky marshals and slower flight schedules that allow time for delays caused by bag matching. New security procedures also add to what Heimlich calls "the hassle factor" for passengers. "From a demand point of view, we sell speed," he says. "That's why people fly, to get from A to B more quickly. Now it's more expensive and it's slower. That's the kind of thing that makes people think twice about their purchase."
Meanwhile, the Nuclear Regulatory Commission (NRC) is trying to respond to reported threats that terrorists might crash airplanes into nuclear power plants or blast them with car bombs. Since Sept. 11, "we have issued more than 20 advisories on extra security measures they should take, and we have been doing inspections to make sure they do that," says Sue Gagner, an NRC spokeswoman. "If we find violations of our regulations, we take enforcement actions." Such actions include a range of fines, revocation of licenses and even jail for willful violations.
Other industries only are beginning to feel the effects of higher security costs as government regulators assess which new regulations to impose. …