Companies that were on a buying spree before 2001 are putting assets worth billions n the block
A casual observer might expect that the industry's economic condition...
Letters to the Editor / Corrections & Clarifications
social causes of the [August] blackout, [and on what] needs to be done about them" is both important and interesting. I am in full agreement on the urgency of maintaining bulk power system reliability. I disagree with his history, and I agree with his argument that reliability has seriously been neglected in recent years.
1. I believe that he overemphasizes .
(A) Con Ed's passing its dividend in 1974 did send shock waves. But the article does not recognize the intellectually serious effort of state commissioners to overcome the Con Ed 1974 effect. I was a Wisconsin commissioner at the time, and we had every intention of trying to sustain the financial credibility of the utilities under our jurisdiction. The lesson I learned was that the utility should always pay its dividend. That has its own harsh problems.
(B) I do not think transmission deficiencies in 2002 come out of prudency reviews in the 1970s. However, prudency reviews were often essential. Capital investment, the basis on which returns are authorized, could not be approved simply because utilities said so. On the other hand, regulators made every effort to approve construction proposals that seemed reasonable. To get down to earth, Wisconsin Electric built a plant named Pleasant Prairie. I am the guy who was responsible, in a split vote, for the finding of emergency that allowed Wisconsin Electric to go ahead. State commissioners did not just stand arbitrarily in the way of plant construction and transmission construction. FERC (and before it FPC) had practically no jurisdiction on power plant construction. When I arrived at the FERC (1977), I found on the commission docket, or in staff work, relatively little attention to the National Power Survey. We were too busy with natural gas, and with wholesale electric rate cases.
(C) Even California does not provide a good case. I went into the California experience in some detail in an article in Public Works Management and Policy in 2002 ("The Artificial Earthquake"). I can find no systematized record of efforts by firms to put a construction program in front of California utilities. In 2001, one of California Gov. Pete Wilson's former cabinet members gave a talk on the California experience, and I asked what "reserve requirements" were considered at the time the legislation was being developed. The remarkable answer was that he simply did not know. If this had been a big issue, a member of the governor's cabinet would have known. If the companies had thought it a big issue, they would have said so.
2. Though I can only mention it here, we should also remember the competitive business pressures on utilities, with the demand from industrial customers. This depresses investment, exactly when it is needed.
3. Sillin is right that reliability has been seriously neglected. It has been hostage to differences of interest and opinion on "competition," "restructuring," and "deregulation." Competition took over as the goal, even at FERC, though Chairman James Hoecker, especially, spoke also of reliability. People who favored deregulation did not want to hear "reliability." In 1997, I testified