Lights! Camera! Fingerpointing!

by RonK, Seattle

Can we attribute the Great Blackout of 2003 to deregulation, generating capacity, transmission bottlenecks, demand management, grid status (modernized, antiquated, third-world), NERC, FERC, terrorism or Canada? Don't rightly know ... but any one of them might arguable cause the next blackout, and advocates on all sides eagerly took up this blackout as the wake up call. Spin machines were spun up to speed before the lights came back on.

"Something must be done!" Bring out your initiatives! Bring out your scapegoats! Bring out your pet legislative riders, in order that what must be done may be held hostage to what the pork market will bear!

There will be a race to legislate. The whip hand will be applied to every hobby horse on the track. Every advocate will read the Blackout as evidence of his Solution A's urgency, and point the finger of blame at every "obstructionist" who looks at Solution A and sees Problem B.

Recall ("Timing is everything") how Sen. Cantwell's anti-manipulation provision was voted down last year -- two weeks before Enron's "Death Star" memo became public. This year's effort failed 48-50 in a virtual news blackout -- Enron is so-o-o 2002 -- two weeks before the Great Blackout. Is the legislative outlook better now that the Fates have grabbed our attention? Not necessarily.

[And as luck would have it, this attention-grabbing development finds Sen. Cantwell out of the country on a high-security, low-visibility war zone codel, returning when Congress reconvenes.]

This year's Senate energy package died ugly, choking on its own amendments, a monument to inept GOP leadership. In its place they adopted a bill Democrats left behind in the conference room last winter ... smothered under a fallen Christmas tree of pet provisions. The GOP Senate intends to strip out everything but the title, and hammer out a new bill in House/Senate conference. The conservative GOP House intends to roll the more moderate GOP Senate. The White House signals it may unbundle some components ... which would break deals already struck. Good luck.

It's hard to pass any inclusive energy package. Too many sacred cows. Too many poison pills. Too many regional differences. Too much porcine opportunism. Too much pressure, too little trust. Too many footprints traced to Cheney's secret meetings with energy sector cronies. And that's just the small stuff.

The big stuff includes huge ideological divides. A wave of market-buff naivete has crested but not crashed, leaving many political entrepreneurs standing staunchly on the wrong side of the learning curve ... after mega-donors have laid out good bundles of cash for favors that are now up in the air. Most legislators have pushed conservation and global warming to the back of the "denial" compartment ... but most of those know it won't stay there.

Now everybody wants to fix the grid. Does "fixing the grid" mean Regional Transmission Organizations and Standard Market Design? Or does it mean a revival of obligation-to-serve, cross-subsidy constraints, reserve mandates and anti-manipulation oversight? Someday, there will be a showdown between true-believer marketarians and the new utilitarians ... but not today. Until then it's trench warfare.

Meanwhile, here's a sampler of early interpretation ...

New York City carried on with grace and verve, but neither Homeland Security nor al Qaeda rose to the occasion. Qaeda should have stood ready to exploit chaos with more chaos. Homeland was slow to grasp the scope of the phenomenon, clearly hadn't gamed out the scenario, and showed no signs of having a plan. Lightning in Canada? Trees in Ohio? Sluggish, off-target responses might as well have been color-coded.

Homeland was quick to declare "it's not terrorism". Good call? Yes and no, and maybe.

The "no terrorism" call appears correct, but drastically premature. Homeland had not confirmed that physical systems were undamaged and reporting systems were uncompromised. Even now the triggering event(s) are only tentatively identified, and we have no idea why the outage spread as it did.

Homeland apparently reasoned by stereotypes. The typical terrorist attack would apply dramatic blunt-force trauma to major structures. The typical engineering and control failures would cause a cascade of related elements to trip offline. Conclusion: "no terrorism". It was foolish -- and dangerous -- to presumptively discount attacks via coordinated sabotage, staff infiltration and/or cyber-attack.

With Bush out raising money, and Energy Sec. Spence Abraham out of the country, Deputy Sec. Kyle McSlarrow stepped up to declare "it's not deregulation". Was he right? Too early to tell.

First-generation dereg divorced the power transmission business from the power generation business, downgrading both from 'service' to 'commodity' models. The invisible hand, now concerned only with unit efficiency, puts a merciless squeeze on reserve margins. (Traditional integrated utility reserves were often excessive, and early-stage dereg lives off the fat of these reserves.)

Capacity to absorb shocks -- both systemwide and in each subsystem that would be 'islanded' in fault-isolation -- will decline incrementally until somebody cries "UNCLE!". There will be dereg-induced blackouts, but analysis of this outage does not (yet) implicate capacity imbalance.

The effect of dereg "culture" is less easily ruled in or ruled out. Traditional utilities developed risk-averse business cultures in pursuit of reliable but unspectacular profits. Dereg'd utilities are a whole 'nother game ... a race for exceptional returns, devil take the hindmost. Swashbuckling is 'in' ... deprecating core service functions, leveraging the rate base to speculate on unproven lines of business ... corner-cutting, outsourcing, downsizing, and demoralized career technical staff.

On multiple channels, McSlarrow spins mythical tales of the California energy crisis ... the kind of stories a true blue market ideologue might have honestly believed before FERC price controls alleviated the "crisis", before courts of competent jurisdiction found Enron and its peers guilty of supply holdups, manufactured congestion and price manipulation.

Anyone who can recite these fables now with a straight face can say anything with a straight face. [Just by chance as I edit this, McSlarrow is on C-SPAN, literally defending his right to say these things "with a straight face".] Even more disturbing, major media have picked up this make-believe and made it the standard narrative ... as if Enron never happened!

McSlarrow was also quick to point the finger at Congress:

"It's absurd that it took this kind of blackout to get us focused on the need to really reform our energy sector," he said. Agreement on the bill has been held up by opposition to the administration's plans to drill for oil in a wildlife refuge in Alaska.

Former Energy Secretary Bill Richardson blamed our "third world" power grid. A bit of hyperbole, that. Does the US have a third-world grid? No, but we're moving in that direction. Only in the third world does anyone operate each component as a stand-alone profit center. The developed world learned better in the late 19th century, and 99% of all electricity ever delivered has been regulated accordingly.

Still, there's no firm evidence yet that "third worlding" contributed to last week's blackout.

Slate's Chris Suellentrop did some digging and highlighted the difference between third-world blackouts (frequent, localized, inconvenient, and inevitable) and first-world blackouts (infrequent, vast, potentially devastating, and arguably inevitable).

Others blamed the "antiquated" grid. There is no firm evidence that an antiquated grid -- or any antiquated component -- contributed to the blackout. Signs point more ominously to a "modernized" grid, with blackout potential heightened by denser connectivity, broader pooling and proportionally lower reserves.

Duhbya declares "It's a wake-up call ... the grid needs to be modernized." What kind of modernization would that be? Deregulation? Privatization? Outsourcing? Downsizing? Tax cuts? Tort reform? Drilling in Alaska?

Industry trade rag publisher PennWell offers a good selection of informed comment:

"Such a system is meant as a safety net, but, in this case, it may have contributed to the cascading effect," stated Kathleen Davis, associate editor for Utility Automation and Electric Light & Power magazines. "We won't know for sure until NERC finishes its investigation and says something more than that they are 'embarrassed' that this happened on their watch."
...
"When the safety systems were designed in the 1970s, the electric power supply industry was regulated and vertically integrated. The responsibility was on the regulated utilities to make sure that electricity was available to their customers. However, this is no longer the case. The users and operators of the transmission system, who used to cooperate voluntary on reliability matters, are now competitors and are no longer as willing to comply with voluntary reliability rules," [Doug Smith of Power Engineering magazine] said.
...
This must mean good news for the power industry ... right? "Wrong. They will get blame, but little help. ... most people will get bored with trying to understand it within a week of the power coming back online," Davis added. "In fact, I'd lay you 7-to-1 odds that -- besides the odd Congressional hearing and a senator smacking a podium in righteous indignation -- very little assistance for the grid itself will actually result from this blackout."
...
"... NERC inherently lacks teeth ..." [Power Engineering magazine's Brian] Schimmoller stated. "Recognizing the morphing nature of the power industry over the past several years -- in which deregulation took wing, utility cooperation declined, and generation and transmission assets were separated -- NERC proposed to convert the voluntary nature of its membership into an independent, industry-led self-regulating structure similar to the one the Securities and Exchange Commission uses ... the North American Electric Reliability Organization (NAERO), would then have enforcement capabilities to ensure compliance with its rules and regulations ... however, it would take a significant amount of time to get it into operation. ..."

When we have the answers, we'll have some answers. Then we'll probably have some new worries ... and most of the same old arguments.

Posted August 19, 2003 12:30 AM | Comments (40)