Here it is:
"April 23, 2000
That Groan You Hear Is From the Power Grid
Issue in Depth
The New York Times: Your Money
By MATTHEW L. WALD
ALLEY FORGE, Pa. -- The power for every street light, every water
pump, every computer, every television set, every television studio -- in
short, everything that hums or glows with electricity for more than 23
million customers from Staten Island, N.Y., to Ashtabula, Ohio, to the northern
tip of Virginia, lay before Joan Clark.
In front of her desk at the power control center here, Clark, a system operator,
surveyed a 20-foot-high wall map of all the region's power plants, lines and
substations. Computer screens displayed data on transmission, her responsibility
on this shift.
In the heat and humidity of last
summer, the lights went out in
parts of New York City, New
Jersey, Chicago and the
south-central states when peak
demand for power overwhelmed
the system. Federal officials and
industry experts say it will
probably happen again this year.
But Clark and her colleagues at
the
Pennsylvania-Jersey-Maryland
Interconnection, the largest
control center on the continent,
try not to let the threat weigh on
their minds.
"I see it as a giant video game,"
said Clark, an 11-year veteran.
She has various tools to fight off
attackers, she said, but "you only
have this one guy, and if the one
guy dies, you're done. The lights
go out."
Clark's "one guy" is in trouble.
The strong American economy
demands ever more power, and
the restructuring and partial
deregulation of the power
industry mean that ever more of
that power is traded and
transmitted between widely separated producers and users. The strains on the
grid are growing rapidly, and the power system's reserve ratio -- the excess of
generating capacity over peak demand -- has narrowed in some areas to an
uncomfortably tight 5 percent or less.
But the restructuring has also created big disincentives for anyone in the
industry to invest in the grid, build new capacity or even pay for research on
how to transmit power more efficiently.
Because of these strains, the nation's power supply is becoming less stable and
reliable, even as reliability becomes more important. Thirty years ago, when the
lights flickered for a moment, hardly anyone noticed. Today, that flicker can
crash the computers upon which the country depends for most everything
from control of complex manufacturing processes to the downloading of
middle-school homework. And no immediate solution is apparent.
Monday, Energy Secretary Bill Richardson, is scheduled to begin a nationwide
series of conferences on power issues with meetings in Hartford, Conn., and
Newark, N.J. "While the demand for electricity is soaring, the reliability of our
electric grid is, at times, faltering," he said in a statement.
ust how much work the grid
does is hard to quantify. Total
consumption and production
(always equal) can be measured, but
not how many megawatt-hours
moved how many miles.
But there are indirect ways to
gauge the strains. One is how many
times utilities invoke an emergency
procedure called transmission line
relief, or TLR, which freezes new
transactions between power
generators and customers for a
while when the grid cannot handle any more volume. In a study last
December, the Federal Energy Regulatory Commission counted 400 such
freezes in the first 10 months of 1999; in all of 1998 there were only 300.
That is a sign that the grid is often unable to support the main goal of
deregulation: to allow independent generators to compete in an open
marketplace. If the grid cannot handle a shipment from the cheapest available
generator, users must buy from a more expensive source, while cheaper
generating capacity lies idle.
Part of the problem, experts say, is that in most of the country,
transmission-line owners charge flat fees regardless of distance or demand. So
they have no means short of a TLR freeze to ease the load when the system is
straining. Almost alone among the consortiums that operate regions of the grid,
Pennsylvania-Jersey-Maryland uses a sliding fee scale for some transmission,
allocating scarce capacity to those willing to pay most, and seldom resorts to a
freeze.
Even if variable pricing were the norm everywhere, transmission remains
regulated, and the earnings of the line owners -- typically utilities -- are capped
at a set percentage of revenue. Variable pricing cannot add to their profits, and
they have little incentive to invest in more capacity.
And it shows. The construction pace for new transmission lines fell by more
than half from the late 1980s to the early 1990s, according to the Electric
Power Research Institute, a utility trade group; experts say it has slowed
further since.
"There's a market solution to the TLR problem," said Philip Sharp, who spent
14 years as the chairman of a House subcommittee on energy and power
before joining the Harvard faculty in 1995. But the market is doing nothing to
solve capacity shortages, he said: "That is the one people have to put their
attention to."
The strains can also produce incredible spikes in the wholesale price of
electricity -- from the normal $20 to $30 for a megawatt-hour up into the
thousands. The spikes would not happen if every area of the country had
enough power plants, or if the grid could always move power to where it was
needed. Experts say they could also be prevented if there was a system to
reward more customers for reducing power use when demand was unusually
high, the way airlines compensate people who volunteer to miss an overbooked
flight.
The other two legs of the three-legged stool of electricity -- generation and
distribution -- are faring much better. Entrepreneurs are building conventional
power plants while scientists make steady advances on alternatives like
windmills, fuel cells and solar arrays. Distribution networks, which deliver
power locally from substations to customers, are using new technology to spot
developing problems and to introduce peak and off-peak billing.
Between the two is the transmission grid -- once securely part of an integrated
industry, now looking increasingly neglected.
In states where electric power has been deregulated -- 24 so far, plus the
District of Columbia -- most utilities were told to choose between being
generators or transmitters and distributors. Separating the two has left the
grid's needs in political limbo.
"When it was vertically integrated, it was much easier for policy makers to see
need," said Charles Gray, the executive director of the National Association of
Regulatory Utility Commissions, whose members are state regulators.
Formerly, a utility went before regulators with a power plant here, customers
there and a clear case for a line in between, he said. Now the utility would be
asking to build lines to carry someone else's power to someone else's
customers, diffusing responsibility and reducing the impetus for the project.
James Hoecker, the chairman of the Federal Energy Regulatory Commission,
said some utilities are not eager to add transmission capacity that would only
let new competitors bring power into their old monopoly territory. The system
will not work well, he said, until specialist transmission companies emerge,
drawn by better incentives. "There's a need to make this an attractive
enterprise," he said.
Another complication is the nature of the grid -- more like a network of canals
than of roads. Power doesn't follow a preset route; it flows along whatever
path offers the least resistance. Even before deregulation, utilities complained of
having to handle power wandering through from one far-off region to another.
But new technology that could ease this problem is languishing in labs.
ittle of this was of immediate concern to Clark, whose Friday afternoon
was going pretty well. Demand was running at about 29,000 megawatts,
far below last summer's peak of 52,200.
But her boss, Phillip Harris, president and chief executive of the consortium,
sees long-term structural problems in the industry that promise difficult days
ahead. He and others believe that companies that want to make money in
unregulated areas will look to build power plants where demand is high. But
little of that vigor will spill over into the boring transmission sector.
"In a regulated business," Harris said, "the way you improve the bottom line is
to decrease costs" -- hardly a recipe for increased investment. And in any case,
transmission is a sideline for the companies that provide it. "It's typically less
than 10 percent of their assets," he said. "It's not going to get most of the
executive-level attention."
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