[BETA] Fortnightly

POWER DISTURBANCES COST U.S. ELECTRIC CUSTOMERS about $26 billion each year: nearly three times the anticipated annual saving from deregulation.

Competition and restructuring will only turn up the pressure, as the grid carries more low-cost power over longer distances to a wider variety of customers.

Already we are seeing a rapid rise in wholesale power transactions. Some utilities now complete as many such transactions in one day as they previously made in one week. Overall, the value of wholesale transactions has increased fourfold over the last decade. About one-half of the electricity now generated in the United States is sold in the wholesale market. This figure may rise to two-thirds with more deregulation.

Can the grid carry this new burden?

The rapid growth in bulk power markets comes at a time when many parts of the North American transmission system are operating close to stability limits. Loads are growing by 2 to 2.5 percent each year - about 30 percent in a decade - but the annual addition of new transmission circuit miles has declined by more than 60 percent over the last decade. The considerable political problems in siting new lines heightens the need for technological and managerial solutions.

On July 2 and Aug. 10, 1996, electrical disturbances on the western transmission system disrupted power to millions of customers in several states and adjacent areas of Canada and Mexico. It has been estimated that the financial losses suffered by the California industry for the Aug. 10 outage alone, due to lost production, spoilage, etc., ranged between $1 billion and $3 billion. In addition, power flows along the Northwest-to-California interties were decreased about 10 percent to provide a greater margin of stability, a fix that imposed an economic loss for the utilities involved.

To guarantee a reliable system that can meet the increased demands of open access, the capacity and reliability of transmission networks will have to be improved. The industry needs technological advances that improve physical control of grid operations through accurate monitoring and data sharing. It also needs legislation to determine who is ultimately responsible for keeping the lights on.

The technological challenge is clear. Yet, any guarantee of efficient power delivery in the 21st century will prove as much a matter of politics as technology.

Reliability: An Institutional Challenge

At the institutional level, the proposed creation of independent system operators marks the most prominent response yet to the challenge of achieving open access on the transmission system while maintaining grid stability.

ISOs control the flow of power over transmission networks under agreement with the transmission owners. (A recent study by the U.S. Department of Energy elaborates on the move to ISOs. %n1%n) Specifically, ISOs are required to provide open, nondiscriminatory access to the grid for both buyers and sellers, while making sure that system reliability is maintained. So far, the utility industry itself is taking the lead in creating ISOs, which enjoy substantial latitude from the Federal Energy Regulatory Commission in terms of their attributes and particulars.

The FERC has already reviewed ISO applications for California, New England, the