NCPA - National Center for Policy Analysis

Grid Failure Predicted

August 15, 2003

The blackout that hit the northeastern United States and parts of Canada yesterday exposed the steadily growing vulnerability of the nation's nearly 200,000-mile network of high-voltage transmission lines, say experts. The North American Electric Reliability Council (NAERC) -- the industry advisory and watchdog group over the transmission system -- warned last year, "The nation is at . . . a crisis stage with respect to reliability of transmission grids."

David Cook, NAERC general counsel, told Congress two years ago: "The question is not whether, but when, the next major failure of the grid will occur."

Electricity deregulation over the past decade dramatically increased the volume of power flowing on the grids -- however, investment in transmission lines dwindled.

  • The Electric Power Research Institute in Palo Alto, Calif., estimated that while power demand has shot up 30 percent in the past 10 years, transmission capacity has increased by just 15 percent.
  • The Reliability Council calculated that $56 billion was needed to upgrade the nation's grids, but only $35 billion was likely to be invested.
  • Energy companies lack incentives to build new transmission capacity because power transmission is tightly regulated.
  • The Federal Energy Regulatory Commission (FERC) is pushing power companies to form multi-state regional grids with authority over planning and system reliability measures -- regulated by FERC, whereas some experts and utilities prefer market regulation.

The move toward deregulation has also exposed NERC's limitations, says utility consultant Peter Fox-Penner, particularly its lack of enforcement powers to detect and stop generators from abusing the grid with unscheduled power deliveries.

The House and Senate energy bills -- now in conference committee -- contain reliability measures; but NERC warns that heavier federal regulation would make matters worse.

Source: Peter Behr, "System's Crash Was Predicted," Washington Post, August 15, 2003; James Jelter (Reuters), "Blackout betrays ailing North American power grid," August 14, 2003; "Legislative Action Is Needed to Maintain Electric System Reliability," North American Electric Reliability Council, August 2003.


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