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Why a Blackout Can Happen Again

By Peter Coy It has already been a year since the great blackout of '03. On Aug. 14, 2003, across much of the Northeast, lights went out, air conditioners fell silent, and computers shut down. The biggest blackout ever in North America knocked out electricity to tens of millions of people from Detroit to Toronto to New York City for periods ranging from a few hours to four days. As people sweltered in the dark, they wondered what could have gone so very wrong -- and whether such a mess could happen again.

Could it? Unfortunately, despite some improvements, the answer is yes: Another big blackout remains all too possible. The reason is politics. The congressional stalemate over the White House's energy bill has blocked critical steps to improve dependability -- such as mandatory standards for control-system computers and operator training and federal authority to issue permits for new power lines when states fail to do so.

INADEQUATE REACTION. Also, operation of the North American grid is dangerously balkanized. Although electricity flows over long-distance power lines without regard to political boundaries, its operation is divided among 140 independent "control areas." Consolidating those areas would increase reliability and efficiency, but many local utilities and their backers in state legislatures resist surrendering control.

Last year's blackout is a prime example of why mandatory, enforceable standards for reliability are necessary. The epicenter of the blackout, Akron's FirstEnergy (FE), had chronic reliability problems. A U.S.-Canadian investigative team concluded that it had failed to correct risky voltage fluctuations in the Cleveland-Akron area and had not cut down trees under high power lines. When the lines sagged and touched the treetops, they shorted out, beginning the cascading outage.

Investigators found that even after the crisis began to widen, FirstEnergy's staff, which suffered from lack of training and inadequate equipment, "did not recognize or understand the deteriorating condition of its system." The company's neighbors got caught by surprise and were dragged down with it.

NEARING ITS THRESHOLD. To its credit, FirstEnergy is voluntarily cleaning up its act. It says it completed by June 30 all the short-term recommendations of the U.S.-Canadian team and the North American Electric Reliability Council (NERC) and is working on longer-term issues. But as long as reliability is voluntary, such problems can continue to crop up.

Ending balkanization would also strengthen the grid. Power lines in New England, New York, and the mid-Atlantic states are already controlled successfully by regional transmission groups. The Midwest, West, and South have resisted such centralization, citing states' rights. But there's ample precedent for superseding local authority when commerce crosses state lines -- as it obviously does in the electricity market.

Aside from operational issues, the U.S. transmission grid suffers from chronic underinvestment. It's being pushed closer to its threshold by the increase in long-distance power flows. One measure of the problem is the number of times operators in one area have been forced to intervene to stop inter-regional purchases of electricity that threaten to overload their segments of the grid. Over the past year there have been an average of 183 such procedures a month in the eastern U.S., up from 45 a month four years ago, according to NERC. (The council has no such data for the western U.S.)

SLOW CAPACITY GROWTH. Adding transmission capacity would enhance reliability and also lower the price of electricity by allowing cheap power to be moved over greater distances. Yet from 1992 to 2002, peak summer demand for power grew at a compound annual rate of 2.7%, while the transmission grid's carrying capacity, measured as the number of miles of wires times the capacity of each wire, grew only 0.6%, according to a study by consultant Eric Hirst for Edison Electric Institute, which represents investor-owned utilities. Comparable data for 2003 and 2004 aren't available.

There's hope: Some big transmission-line projects are on the drawing boards in regions with the worst congestion. But progress remains painfully slow. A year after the big blackout, we're still fumbling in the dark. Coy is BusinessWeek's economics editor

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