July 1, 2001
L.A. Loves a Loophole
There's no getting around it...
The Rewards of Reliability
As one of the early voices in the "reliability debate," urging all of us not to lose sight of the importance of reliability of electric bulk power supply (see, for example, my article in the Oct. 11, 1990, issue of PUBLIC UTILITIES FORTNIGHTLY, on the occasion of the 25th Anniversary of the Northeast Blackout of 1965), I applaud the FORTNIGHTLY for sponsoring a forum on "Reliability, Transmission and Competition" in its June 1, 1997 issue (p. 45). By doing so, your magazine has provided an important public service.
While reading the contributions of your eight forum participants, it was gratifying for me to find that each one of them (em policymakers, regulators, electric utility executives and power marketers (em recognized reliability as an essential ingredient in restructuring the electric power supply industry. This was not so back in 1988, when the original Notices of Proposed Rulemaking dealing with the then-proposed changes in the electric power supply industry (identified as Docket Nos. RM88-4-000 and RM88-5-000) were promulgated by the Federal Energy Regulatory Commission.
Although a large part of the credit for this change in attitude must be given to the electric utility industry for its persuasive articulation of the importance of electric bulk power supply reliability considerations in any program of greater competition, much credit is also due to the other participants in the reliability debate for keeping an open mind on this important issue. Quite particularly, credit is due to the FERC (em as it is now constituted (em for its willingness to listen to the experts and for establishing a framework where organizations such as the North American Electric Reliability Council and the Electric Power Research Institute can provide meaningful input to the entire process.
About what the participants said, I have two specific comments:
1) Mr. Dodd's statement that the key issue is "meeting the customer's definition of reliability, and that depends upon the customer," requires some qualification.
There are two distinct aspects of reliability of electric power supply: (a) reliability of electric power supply to individual residential, commercial and industrial customers, and (b) reliability of electric bulk power supply for the entire interconnected power grid throughout a large geographical area. Concerning the first, I agree wholeheartedly with Mr. Dodd's statement. With regard to reliability, (and this is the area where NERC and ISOs are bound to be major facilitators) the integrity of the overall interconnected power grid within a large geographical area transcends the power supply reliability requirements of individual customers. Thus, individual customers within a region cannot adjust the bulk power supply reliability within their region to their particular, individual requirements. (They do have the ability, however, to adjust their own power supply's reliability through a variety of measures, including provision of stand-by power, etc.)
2) I cannot agree with Mr. Chupka that maintaining reliability of bulk power supply in the future "will be a matter of the incentives in the market." In fact, there is no practical way (em as explained briefly below (em for such market incentives to become operational with regard to reliability of electric