When regulators grant changes to utility rates of return, they estimate growth on the basis of gross domestic product (GDP). But do utilities have any chance of growing at the same pace as GDP?...
Electric Reliability: How PJM Tripped on Gas-fired Plants
Just after the sun rose on January 19, 1994, the mercury fell to new record low temperatures. Lights went out, furnaces shut off, and computer screens went blank in parts of Delaware, Maryland, New Jersey, Virginia, Washington, DC, and Pennsylvania. The 11 electric utilities that compose the PJM power pool had begun rolling blackouts (em the first ever in winter, and the first since the summer of 1970.
Looking back at this extraordinary event reveals that much of the ensuing conventional wisdom about the rolling blackouts of 1994 is wrong. Looking back also provides valuable insight into the future of the electric industry as customer choice reshapes it.
The multistate PJM power pool was formed to increase reliability and efficiency through central and economic dispatch of the pool's 57,626 megawatts (MW) of installed capacity. Economic dispatch saved consumers millions of dollars. But the pooling of capacity made electric service so reliable that too many people took it for granted. It was, then, a shock to discover on January 19 that the PJM operators could not meet the morning peak of 40,554 MW. The five Pennsylvania electric utilities in PJM experienced the greatest difficulty in meeting demand. At the urging of the Pennsylvania Commission, the governor declared a state of emergency.
Members of the Pennsylvania Public Utilities Commission (PUC) joined with officials of the Governor's office and colleagues in other states, as well as the federal government, to discuss how best to conserve electricity. Each affected jurisdiction then took measures to reduce demand. This regional cooperation was important, because the rolling blackouts were apportioned according to the ratio of each company's installed capacity to the pool's total capacity. If a company's generation constituted 15 percent of the pool's capacity, that company dumped 15 percent of the demand that could not be supplied, even though it may not have been responsible for the regional capacity shortage. No company could escape the burden of blackouts if the regional pool's supply of electricity was inadequate to meet demand.
If we take for granted the reliability of the electric system, we do so at our peril.
What Caused the Blackouts?
Some say the supply emergency occurred because too little generation had been built. Others point to transmission constraints. Still others argue that the extreme weather caused the emergency. These answers are either flatly wrong or too simple.
First, the daily peak on January 19 hit 40,554 MW (em 17,072 MW less than the total built capacity of 57,626 MW. The installed reserve was 42.1 percent. From January 17 to 21, the weekly peak was 41,351 MW, which occurred on the evening of Tuesday, January 18, about 13 hours before the blackouts. That weekly peak was met without resort to rolling blackouts, though other emergency procedures proved necessary. PJM's historic peak was 46,429 MW; it too was met without rolling blackouts. Clearly, the blackouts were not caused by too little installed capacity.
The blackouts also were not caused by transmission constraints. On January 19, PJM utilities bought 4,124 MW from utilities outside the pool. At crucial moments, however,