LIGHTS OUT IN THE NORTHEAST
Power Industry Sets Campaign
To Upgrade U.S. Electrical Grid
By JOHN J. FIALKA
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON -- The nation's electric-power industry, thrust into the public spotlight by the Aug. 14 blackout, is preparing to launch a public-education
campaign to help it raise $100 billion from investors, governments and consumers to upgrade the nation's power grids.
The nucleus of the argument, embodied in a 72-page plan written before the blackout, is that the U.S. must overhaul the electrical grid with 21st century
technology because patchwork fixes on the current transmission system will result in continued outages that are costing businesses about $100 billion a
year.
"We want to build as big a coalition as possible," said Kurt E. Yeager, president and chief executive of the Electric Power Research Institute. The institute
is a nonprofit research group in Palo Alto, Calif., that represents more than 1,000 companies, including privately and municipally owned utility companies
and rural electric cooperatives, who are often at odds. "There is a real concern among our members that when the economy comes back strong whether
we are going to have trouble keeping the lights on."
The institute's report, approved during early August, is being released Monday. In what the blackout made
obvious, the report says the U.S.'s transmission system would be the likely "first point of meltdown" for the
power industry. "A lot of people had been saying that. It was not a seminal insight," Mr. Yeager said. He said
he hopes the blackout will make selling the findings easier to interest groups that had little interest in the power
grids.
The report said investment in the nation's three electric-power grids declined $20 billion a year compared with
historical trends through the 1970s and said Congress and state regulators will have to agree on a simpler, more-coherent set of rules for operating the
transmission system before investors will come back.
It said the result of the new investment, if applied to new technology, would be a network of digitally run controls on power flows and computerized,
second-to-second monitoring that would result in a "self healing" grid. It would include what engineers call "adaptive islanding," an ability to quickly isolate
trouble areas, so power failures, such as the one in northern Ohio, can't cascade throughout the rest of the nation's transmission system.
The institute estimates the cost of adding such controls will add about 10% to the average consumer's electric bill. The investment will cost the average
homeowner $100 a year, but improvements in productivity that result from more-reliable transmission and other upgrades will eventually save the
consumer $500 a year, it said. The report calls for the industry to emphasize the "increasing...functionality and value of electricity," rather than touting it as
a low-price commodity.
The report said that while consumers, not taxpayers, should bear most of the cost of the improvements, the industry will need to solicit government
support, including better tax treatment of dividends, investment-tax credits, shorter depreciable lives for new technology and "infrastructure-lending
programs."
Rep. W.J. "Billy" Tauzin, a Louisiana Republican and chairman of the House Energy and Commerce Committee, said he agrees with the argument that the
industry will need government help to bring back investors. "Transmission is the lowest profit center in this industry. Unless we do something to
incentivize people [to make investments] they won't do it." The House version of the energy bill pending in Congress orders the Federal Energy Regulatory
Commission to give better rates to companies that upgrade transmission and will encourage broader use of independent, regional transmission organizations
to control the grid.
"Investors don't like regulatory uncertainty. They want to know what the rules are going to be," Rep. Tauzin
said.
In an effort to develop what Mr. Yeager calls a "national leadership team" to help sell its plan, the institute has
given previews to members of outside groups, including business executives and labor unions. Ralph
Cavanagh, an energy analyst for the New York environmental group Natural Resource Defense Council who
has seen the plan, said: "What is interesting about this is that industry is coming together in an intriguing
way."
Mr. Cavanagh said he was impressed by the institute's findings that a "smarter" transmission system would
include computerized metering that would allow consumers to automatically reduce electricity demands at
peak periods when power costs are highest. "This is not a call to pump more money into business as usual,"
he said.
David Bodde, a professor of technology at the University of Missouri at Kansas City, said he supports the
institute's case for higher electric costs, as long as investments are made to upgrade the grid. People have to
think of electricity as something other than a cheap product, he said.
"Think of being able to run your computer, of the ability to hear Mozart at 3 a.m.," Prof. Bodde said. "It
scares me that we still don't have a consensus about electricity deregulation," he said. "Somehow we have to
make a national grid system work."
Steve Smith, president of Hoosier Energy Rural Electric Cooperative Inc. of Bloomington, Ind., said: "Different industry stakeholders may not agree with
every proposal, but there is much here that should be acceptable to most."
Rural electric cooperatives are often at odds with big utility corporations, but Mr. Smith said there is a pressing need for a "broad consensus" on what to
do about the state of the nation's transmission system. "It isn't a pretty picture."
WWS - i will add those later thxs. |
