6.  The Real Energy Blackout Culprit
    by Todd Andrew Barnett
    libertarianman{at}comcast.net

Special to TLE

In case anyone hasn't noticed, so many members of the media, public
interest firms, pro-regulatory groups, pundits, federal and state
regulators, and politicians -- not to mention so many Americans -- by now
have finger pointed "free enterprise" and
"deregulation" as the primary sources of the recent East Coast
power outage. The blackout, which took hold on over 30 million people from
New York to Ontario, Canada, to the Southeastern region of Michigan at
approximately 4:10 p.m. on August 14th, 2003 and ended for most people on
August 15th, 2003, has also re-ignited the public demand for more federal
encroachment on and involvement in the power industry -- an industry which
has become quasi-public due to the burdensome and cumbersome amount of
federal and state energy and environmental regulations. While there are
those who are expressing their outrage at the power companies and assigning
blame to them by claiming that "market failure" is the culprit
behind this mess, should those of us as free-thinking, independent
individuals be shocked by all of this?

Let's take a stab at what exactly transpired, shall we?

It all started at 2 p.m. when FirstEnergy Corporation's Eastlake Unit 5,
which happens to be a 680-megawatt coal generation plant in Eastlake, Ohio,
went offline. "On a hot summer afternoon, that wasn't a unique event
in and of itself," said Ralph DiNicola, a spokesman for the Akron,
Ohio-based company. "We had some transmission lines out of service and
the Eastlake system tripped out of service, but we didn't have any outages
related to those events."

Then at 3:06 p.m., its Chamberline-Harding power transmission line -- a
345-kilovolt power line in the northeastern region of Ohio -- was cut off.
At this time the company reported no cause, but the outage immediately
caused a strain on its Hanna-Juniper line, a 345-kilovolt line which, at
3:32 p.m., experienced a power surge coursing through it, resulting in a
heating of its wires and then causing them to sag into a tree and short
out.

By 3:41 p.m., the company's Star-South Canton 345-kilovolt line experienced
a power overload, inducing a crash of a breaker at the Star switching
station. This system, of course, allows the grid to interconnect with the
American Electric Power Co.'s own neighbor grid located in northeastern
Ohio. Then at 3:46 p.m. AEP's 345-kilovolt Tidd-Canton Control transmission
line cut off its connection with FirstEnergy's grid, located at AEP's
connection station in Canton, Ohio.

Around 4:06 p.m., FirstEnergy's Sammis-Star 345-kilovolt line, also in
northeastern Ohio, failed then reconnected. Then at precisely 4:08 p.m.,
power utilities in Canada and the United States began to witness "wild
power swings." Sean O'Leary, a chief executive of the company Genscape
that monitors electric transmissions, confirmed the event. "It was a
hopscotch event, not a big cascading domino effect," he said.

At 4:09 p.m. in Cleveland Ohio, the city's low power levels, which were
inadequately juicing up customers of the city-owned Cleveland Public Power
utility, dropped to zero. Jim Majer, one of the commissioners of Cleveland
Public Power, was noted as saying, "It was like taking a light switch
and turning it off. It was like a heart attack. It went straight down from
300 megawatts to zero."

At 4:10 p.m. the Campbell No. 3 coal-fired power plant, located near Grand
Haven, Michigan, experienced power failure. At the same time two
345-kilovolt lines -- one labeled Hampton-Thetford in upper New York State
and Vermont and the other called Oneida-Majestic in upstate New York --
also failed.

Within seven minutes, states like New York, Ohio, New Jersey, and Michigan
experienced severe power loss. Before everyone knew it, the dominoes fell
from there. The next event took place at precisely 4:17 p.m. near Detroit
where the Enrico Fermi nuclear plant shut down automatically after it lost
power. Between 4:17 and 4:21, numerous transmission lines in Michigan were
out of commission. Finally, at 4:25 p.m. in Buchanan, New York, Indian
Point nuclear power plants 2 and 3 lost power immediately, automatically
closing them down.

In a nutshell, the East Coast power grid collapsed, leaving nearly 30
million people in the dark for almost 24 hours.

Of course sometime after the blackout begin, Canadian Prime Minister Jean
Chretien publicly purported that a lightning bolt took out a nuclear power
plant in Niagra Falls, New York. (He was also the one who, a few hours
later, claimed that fire was the cause of the outage.) But the National
Weather Bureau Service reported no severe thunderstorm activity near the
plant at the time the outage took place. Moreover, even the Niagra Falls
Fire Department was not called on duty to put out the "fire" at
the plant -- one that turned out to be a bogus report on Chretien's part.
Even Maria Smith, a spokeswoman for the Pennsylvania Emergency Management
Agency, refuted Chretian's claims. "That is absolutely not true,"
she said. "It's bizarre. We have a direct line to each of our five
(nuclear) power plants and they are all running at 100 percent ... There's
not even a trash can fire, we would know." Fortunately, those bogus
assertions made by the Canadian prime minister were discarded within hours.

While no one knows for certain what ignited the blackout, it is apparent
that the entire power grid system has become gravely vulnerable. President
Bush says that this incident serves as a "wake-up call." He's
right, but not for the reasons he likes to stipulate.

And here's why: the power grid system, which hasn't been upgraded for
decades, is claimed to be owned by private power companies. However, this
is a contention, which has no foundation whatsoever. How can an antiquated
system be under the auspices and control of the "free enterprise
system" when it is regulated by the Federal Energy Regulatory
Commission, the Environmental Protection Agency, and a handful of federal
and state agencies?

The truth is that the system has never been privately owned; instead, it is
a publicly-owned entity. The entire power industry is overregulated,
meaning that it is under the command and control of the federal government
(this was started at the request of industry insiders who largely favored
and desired their own status as state-protected "monopolies") by
finding itself saturated with exorbitant amounts of regulations. This
state-conferred enterprise gives the power industry a unique advantage: to
have direct control of the power systems by placing them in the hands of a
centralized authority and limiting the amount of power plants constructed
to generate the desired amounts of power. Another advantageous benefit is
that, with assistance from the state, power transmission companies have an
exclusive legal monopoly on how the transmission and distribution of power
should be directed and to where it should be sent.

The other truth is that the entire industry has never been truly
deregulated. Many Americans, pundits, politicians, and pro-regulatory state
groups are now targeting deregulation, which is the elimination of
government restrictions and rules on an industry, for the abrupt darkness,
but their assertions don't stand up to logic. Even though it is true that
regulations of retail sales and energy production were scaled back
throughout most of the 1990s, regulations of energy transmission and
distribution increased significantly. In other words, the state switched
the old energy rules for new rules. After all, this has become so
commonplace in this business, in spite of the fact that very few industries
are more overregulated and protected than the utilities industry.

The lack of investment in the grid was initially blamed for the problems.
It is true that there has not been much investment in the maintenance of
the grid system for years. But there is a reason for this. The state takes
up the responsibility of considering, approving, and financing transmission
programs, the benefits reaching and entering state lines notwithstanding.
At the same time, federal and state officials and legislators avoid seeking
to use subsidies to finance investments that would furnish enormous
benefits for out-of-state consumers. Adding insult to injury, many
incumbent utilities and state lawmakers, acting out of their own
self-interest, do not wish to improve the grid, simply because such
improvements would result in said politically- favored companies (the ones
who own and control the generating plants, transmission lines, and
distribution systems within a given service location) losing their
customers to other competitors that provide updated transmission networks.

Another reason for the deterioration of the grid is that regulations
discourage profit-seeking companies from investing in transmission
equipment. As a result, utilities capitalize on other services that bear no
relation to the transmission interconnections. Moreover, investors find
themselves in a regulatory quandary with the state, all because of the fact
that rules make it completely difficult for entrepreneurs to resolve their
regulatory differences with officials. Ergo all of this evokes the
unnecessary delay in the risky investment on the grid.

In summation of the problems here, it is not free-market capitalism but
rather government bureaucracy and regulations that have stifled innovative
progress for the energy producers. If any blame is to be directed at any
enterprise, it ought to be aimed directly at the federal and state
leviathans for these problems -- not at the free market.

What can be rectified to solve these problems? It's simple: try true
deregulation of the entire grid -- that is, throwing out all the federal
and state rules -- and allow the market to work in favor of its consumer
base. Jettison all price subsidies and controls, which force all rate of
returns on transmission to be unprofitable. Purge all state controls that
shield transmission producers from competition. Remove the never-ending
political conflict that has engulfed the business -- conflict over the
organization and
management of transmission and feed of energy. Allow grid owners to assume
responsible roles as entrepreneurs, so that they can serve their fiduciary
roles as market agents and figure out efficient, market-based solutions
that will energize their business -- solutions that entrepreneurs are
better at exercising than legislators and regulators. Moreover, it is time
for the market to construct more grids that will drastically reduce the
stress on the
power systems.

And finally it's time to privatize the entire industry, so that producers
can rely on accurate price signals and deliver quality services for their
consumers. By forcing the real energy blackout culprit -- that is, the
state -- out of the energy business, consumers will be charged for services
for which they are actually willing to pay. It is time for a separation of
business and state -- and that includes the energy business.

--
copyright 2003 by Todd Andrew Barnett. All Rights Reserved. Permission to
reprint any portion of or the entire article is hereby granted, provided
that the author's name and credentials are included.

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