Energy-Supply System Faces Increasing Obstacles

By Jacob M. Schlesinger
644 words
15 August 2003
The Wall Street Journal
A10
English
(Copyright (c) 2003, Dow Jones & Company, Inc.)

WASHINGTON -- After the Great Northeastern power blackout in 1965, the country's utilities vowed to prevent such a disruption form recurring. They banded together to form the North American Electric Reliability Council, or NERC, to provide better coordination among suppliers.

The system worked well for 30 years. But earlier this year, Michehl R. Gent warned Congress that, under the strains of competition and deregulation, the system was breaking down.

"As economic and political pressures on electricity suppliers increase and as the vertically integrated companies are being desegregated, NERC is seeing an increase in the number and severity of rules violations," Mr. Gent testified to the House Energy and Commerce Committee in March.

It's too soon to say whether yesterday's power outage throughout the Northeast, Midwest and Canada resulted from the complexities Mr. Gent talked about, or some other technical glitch. But the most widespread power outage in years is sure to cast a new, tough spotlight on the experiment in electricity deregulation, just as the California energy crisis of 2001 did, as well as the Enron Corp. scandal that unfolded through the following year.

The rules for the modern electric system were written with the first major blackout ever experienced in North America in 1965. The outage shut down much of New York City as well as the East Coast. Two year later, another outage shut power in four Northeastern states.

Experts concluded a big cause of those blackouts was a lack of coordination and design among electrical suppliers, so a power surge in one area could suddenly overwhelm others with related lines.

NERC was designed to offer better planning and cooperation. Based in Princeton, N.J., the private organization oversees 10 regional reliability councils around the country. In its mission statement it says it has "operated successfully as a voluntary organization, relying on reciprocity, peer pressure and the mutual self-interest of all those involved." The group adds it "has helped to make the North American bulk-electric system the most reliable system in the world."

Indeed, the country went a long time without major regional outages. The 1977 New York City blackout was a local affair. It wasn't until a Western power outage in 1997 that the country saw another widely spread blackout.

The massive jump in electrical needs during the rapid growth of the 1990s, and the continued spread of computer use, would likely have strained that system of cooperation under any circumstances.

"The load in New York City has grown at an unbelievable pace," Clark Gellings, vice president for power delivery and markets for the Electric Power Research Institute, an industry-funded organization, said after yesterday's outage. "All the digitization of society, the new business locating in New York City, has all put overall stress on the system," he added.

NERC officials also started to grow worried throughout the 1990s about getting their members in a deregulated environment to work with each other. "With the coming of competition, utilities that once cooperated with each other are now competitors," David Nevisu, a NERC vice president, told Congress in 1999. "And there are more of them as well as many different types of electricity suppliers."

The answer, promoted by NERC and others isn't reregulation. That would be like putting the genie back in the bottle. But officials there are promoting a stronger ability to enforce rules -- much like the pressure after the financial scandals for the Securities and Exchange Commission and private accounting-standards boards to play a bigger role in policing those industries.

"It's just a matter of time before it happens. We'll see it on the 6 o'clock news," a 2000 editorial in "Electrical and Construction" magazine warned. "The report will read something like this: The entire Eastern Seaboard is without power . . . "

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