Article in The Times of Northwest Indiana: Competition frazzles the grid

Consumer demand for electricity and construction of new power-generating facilities is rising, but even after last summer’s massive blackout, investment in the nation’s strained electricity transmission grid is lagging, partly because of federal-state turf contests. Reliability of the grid, experts say, is threatened.

According to the North American Electric Reliability Council (NERC), a not-for-profit corporation of power industry members that oversees the grid’s reliability, for every gigawatt of new power generation capability installed in 1972, there was roughly $200 million in year-2000 dollars invested in the transmission grid. That’s $6 billion spent on the lines supporting 30 gigawatts of new power plants.

But in 2001, 41.8 gigawatts of new power plants got only $3.9 billion — or about $90 million per gigawatt, less than half the 1972 level — invested in the transmission grid. And in 2002, 57.7 gigawatts of new power plants came online and only $3.5 billion was invested in the grid. That’s $60 million per gigawatt. NERC estimates about 53.8 gigawatts of new power plants were added in 2003, accompanied by about $3.8 billion in grid investment –- or $70 million invested per new gigawatt.

“It doesn’t seem this blackout is attracting the financing activity it should have,” said Richard Stavros, executive editor of Public Utilities Fortnightly, a magazine covering the power and gas industry.

Investment in the grid is being held up in part by a complicated power struggle between state and federal authorities.

In 2003, the Federal Energy Regulatory Commission (FERC) tried to encourage grid investment by allowing companies to charge up to 3 percent more for transporting power though their lines if they joined a regional transmission organization (RTO). RTOs are not-for-profit companies responsible for directing power across the grid in the same sense that air traffic controllers direct flights in and out of airports. In joining an RTO, a company gives it control of the company’s transmission lines.

“Everybody thought last year that would create a huge investment wave,” Stavros said.

But some states, concerned that the higher rates allowed by FERC would raise electricity prices for their constituents and undermine their regulatory authority, temporarily barred companies in their states from joining RTOs, or instituted approval processes for joining an RTO.

FERC has proposed ordering companies to give control over their transmission lines to RTOs, but the stalled federal energy bill, if passed, would forbid it until 2007, said Bryan Lee, spokesperson for FERC. However, a court case underway between FERC and American Electric Power Co. Inc., a utility holding company, may help resolve whether FERC or the states have authority over companies in regard to joining RTOs.

And there’s another debilitating tussle between the federal and state governments, over which should control siting, the process by which a new site is chosen and approved for the installation of new power lines.

States currently have siting authority, and it can take years to get approval from all the different entities involved in a siting decision, especially troublesome when power lines in today’s partially deregulated electricity market need to cross the nation.

Deregulation — initiated by the Energy Policy Act in 1992 — revved up in 1996 with an order from the Federal Energy Regulatory Commission. It required any company owning electricity transmission lines to let other companies send their power through those lines. As a result, consumers could pick and choose their power supplier from around the nation, birthing a national, competitive market for power.

But the essential backbone of that national power market — the nation’s transmission grid — was built to handle local, intrastate transfers of power. It was never intended to cope with the massive movement of power across the nation that has pushed the power lines toward their limits.

“The existing interconnection transmission systems in this country are today being used in ways for which they, frankly, weren’t designed,” said Brant Eldridge, executive manager of the East Central Area Reliability Council, one of 10 regional members of NERC. “You don’t have as much margin if something goes wrong as you used to have.”

Richard Bulley, executive director of Mid-America Interconnected Network, another regional member of NERC, said the power lines are currently operating closer to their limits, subsequently requiring closer scrutiny of the lines than in the past.

Providing that scrutiny in the Midwest is the Midwest Independent Transmission System Operator Inc. (MISO), a non-profit organization located in Carmel, Ind. MISO, founded in 1996, was the first regional transmission organization (RTO) approved by the Federal Energy Regulatory Commission.

MISO’s reliability coordinators watch over the transmission grid stretching from eastern Montana to Indiana and Michigan. If they spot a problem, they tell local control-area operators — working for utility companies — who then fix it by altering the flow of power across their utility’s section of MISO’s portion of the national grid.

In its investigation of last summer’s blackout, NERC found MISO partially responsible and asked it to improve a host of its operational aspects by June 30.

One improvement includes MISO giving its reliability coordinators five more days of training dealing with emergency power situations. NERC also asked MISO to improve its ability to monitor the power grid, a task primarily accomplished by the grid overview — a screen showing all the different points on MISO’s grid area and the amount of power flowing through those points. The overview did not cover all of MISO’s territory until October 2003, over a month after the blackout, said Roger Harszy, vice president of engineering at MISO. But in December, MISO launched an upgraded computer system that increased its ability to track the flow of power across the grid.

“The full deployment of our set of tools that we have now would certainly been very beneficial in August last year,” he said.

Additionally, NERC asked MISO to report any grid disturbances it observes — even if the meaning of the disturbances is unclear to MISO — to other reliability coordinators and control-area operators, Harszy said. Before the blackout, MISO would analyze disturbances and report its findings rather than each disturbance, he said.

NERC also initiated a new, tri-annual inspection of the nation’s control-area operators and RTO reliability coordinators. Reports of all of the new inspections will be made public, whereas only the inspections of reliability coordinators were made public in the past, said Michehl Gent, president and chief executive officer of NERC, during a press conference.

The reports NERC receives will also offer more thorough information — identifying specifically who made a violation and the exact nature of the violation. Past reports sent to NERC listed the quantity of violations, but did not identify the violators or details of the violation, Gent said.

Stavros said NERC’s recommendations were a good sign, but they fell short of addressing the real problem because NERC, a voluntary organization, lacks regulatory authority. If it had approval from Congress to enforce its recommendations, he said, it could set standards that would require utilities to invest in the transmission grid.

“If the money’s not going into upgrading the transmission infrastructure, how are you going to be able to adequately tell the American public that you’ve been able to improve reliability?” he said.
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*This is the full version of the article; The Times of Northwest Indiana published a shortened version in its Sunday business section (February 29, 2004).

*The Medill News Service published this article in February 2004. It is archived here.

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