This Summer, Power-Hungry U.S. May Feel West's Pain

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By ERIC SLATER, Times Staff Writer

CHICAGO--California's electricity meltdown has been so spectacular that, until recently, much of the rest of the country was sitting back, feet up, watching the rolling-blackout show on television.

No longer. As summer approaches, utility operators across the nation are scrambling to shore up their own systems, many of which are themselves in the murky middle of deregulation and in varying states of neglect and disrepair.

In Chicago, the recently overwhelmed power provider actually advises competitors on where to build power plants. In New York City, officials say the difference between light and dark this summer may be 11 mini-generators. And in states from Arkansas to North Carolina, legislators are watching California's deregulation fiasco and slamming the brakes on their own plans.

The West is bound to suffer the most this summer, experts agree, but it's going to feel long and hot across much of the rest of the country, whether it really is or not. And with the economy already sputtering, the largest power shortage since the Arab oil embargo of 1973 could be nudging the country toward recession.

"Pray for continuous clouds," advised San Francisco-based energy consultant Edward Kahn. A good word for cheaper gasoline in the Midwest, strong backs for coal miners in the South and lower natural gas prices from coast to coast might be in order as well.

In the U.S., electricity flows a bit like water in that the two largest grids separate roughly along the Continental Divide. Power generated in the West stays there, for the most part, and likewise the juice in the East. (Texas has its own grid.)

With California, the world's sixth-largest economy, continuing to founder after its steady diet of deregulation mistakes, the other 10 mostly rural states in the Western grid are likely to suffer as well. As Rep. Jay Inslee (D-Wash.) put it: "You can, today, see blackouts coming, big as life, and an energy crisis going into the fall."

The Eastern Interconnect, however, is larger than its Western sibling, more diverse in its sources and more complex in its physical structure, and thereby protected from some Western-style utility woes. But, from a serious transmission-line bottleneck near Eau Claire, Wis., to a 28-year-old Florida law that some say is stifling much-needed growth, the Eastern grid has its own kinks, soft spots and weaknesses.

If things start getting out of hand on this side of the Rockies, the first fissure is likely to appear in the last place a fissure is needed: New York. When rates for many California customers shot up by as much as 46% last week, New Yorkers could commiserate. They have seen their rates rise 40% since 1999. A sweltering July or August could send prices up an additional 50%, some analysts predict.

As in California, New York has deregulated its power industry, so the market, not the state, sets the price. And as in California, New York is heavily dependent on natural gas to fire its generators--a commodity whose price has skyrocketed recently. New York, again like California, also fell behind in the construction of new plants--the last one going up in 1995--even as demand was growing dramatically.

Now the city's power provider, Consolidated Edison, figures it has a thin insulation of extra kilowatts to get it through the summer --unless it's a bad one. Just in case, Con Ed wants to sprinkle the 11 mini-generators throughout the city. Environmentalists, concerned about the air pollutants the generators will kick out, have already filed suit to stop the plan.

Upstate New York has electricity surpluses ready to sell to the Big Apple. So does the nearby PJM (Pennsylvania, New Jersey, Maryland) Interconnection, which serves more than 22 million customers along the Eastern Seaboard and has deregulated cautiously and effectively.

But "New York City--even assuming those generators come on line--is going to be nip-and-tuck," said Bill Brier, vice president of Edison Electric Institute, which represents private utilities. The reason: Transmission bottlenecks make it all but impossible for the city to import power on especially bad days. The Eastern grid is a much more intricate web than that in the West, a mesh of more and smaller lines ferrying electricity to a more evenly distributed population.

But deregulation has fundamentally changed how the grid is used without preparing it for its new free-market role. Constructed as a heavily regulated series of channels for efficiently floating power from one utility with extra power to another in need, the grid is now open to private electricity merchants who sell to the highest bidder. In 1996, 25,000 transactions took place on the grid, according to the Edison institute. By 1999, that figure had rocketed to 2 million. "That," said Brier, "is why you're having more and more bottlenecks in the system."

While deregulation has forced utilities to open up their transmission lines to competitors, it has also allowed the marketplace--rather than need--to dictate where new lines are strung. In Minnesota, state officials would like new lines to come in from the west and north, bringing cheap power from the Dakotas and Canada. But Minnesota utilities would rather build lines in the opposite direction, enabling them to sell power to Chicago and Milwaukee for perhaps twice the price they're getting from Minnesota customers.

Of course, the utilities are running into the problem that always accompanies proposed construction of 13-story metal towers buzzing with megawatts: massive public opposition. In Wisconsin, a powerful grass-roots group called Save Our Unique Lands calls one proposed line a "250-mile scar" and points out that the line would go primarily to benefit not Wisconsinites but their oft-derided urban neighbors, Chicagoans.

Just two years ago, Chicago, not California, was the daytime nightmare of the electrical world. A summer of blackouts large and small began in July, when more than 100,000 customers lost power on a 104-degree day, and continued on and off for weeks, with 30 blocks of the central business district going black for hours one Thursday afternoon.

Mayor Richard M. Daley went ballistic when Commonwealth Edison revealed it couldn't warn of rolling blackouts because it wasn't sure how its byzantine cable system works. After hundreds of millions of dollars in upgrades, Chicago will still be vulnerable to blackouts this summer. But the outages will be isolated problems of overload or mechanical breakdown, not the systemic failures likely in the West.

In Illinois, restructuring that began in 1997 has gone relatively smoothly, and the state and much of the Midwest has benefited from solid policy and a decent amount of luck. Just over half of Illinois' power comes from coal-fired plants, which are cranking it out at a fraction of the cost of natural gas-driven generators. An additional 42% comes from Illinois' 11 nuclear power plants--more than any other state.

Only recently the ultimate utility albatross, nuclear reactors are gaining some favor in the Bush administration. Operated by ComEd, which is still working hard to burnish its image after the 1999 blackouts, every reactor in Illinois is not only up and running but at record output, according to David Helwig, ComEd vice president for operations.

In a brilliant public relations move, ComEd also printed maps of the best sites for new generators and handed them out to competitors. With less stringent environmental laws than in California, which hasn't built a major plant in a decade, Illinois has continued to build. More than 3,000 megawatts went online last year--about 10% of the state's total load--and 10,000 more are planned for this year.

"If we have a problem in the Midwest, it's not going to be with generation, it's going to be with the transmission grid," said Terry Harvill of the Illinois Commerce Commission. When the Eau Claire-Arpin line in Wisconsin overloaded at the same time as a transformer in southeastern Ohio in June 1998, the Midwest became all but isolated from the rest of the Eastern grid.

And the incident demonstrated dramatically another problem of deregulation that could still haunt the system this summer. As operators scrambled to stave off blackouts, prices on the spot market skyrocketed from $25 per megawatt hour to $7,500 per megawatt hour.

Tom Overbye, an electrical and computer engineer at the University of Illinois at Urbana-Champaign, wrote about the incident in a paper on deregulation's effect on the power grid. "Imagine your consternation," he wrote in American Scientist, "if one day you pulled into a gas station and discovered the price had increased three-hundredfold, from $1.50 per gallon to $450 per gallon."

The South, with its massive coal reserves, slow population growth and, for the most part, a go-slow approach to deregulation, is likely to weather its typical summer swelter, with one possible exception: Florida. With a fast-growing population and a huge predicted shortfall of 11,000 megawatts over the next eight years, Florida had been a key target of merchant operators looking to build.

"Everyone saw Florida as the place to go," said Rick Rhodes of Duke Energy, a major private supplier. But when Duke prepared to build a 514-megawatt plant in New Smyrna, the state's three investor-owned utilities filed suit under a nearly 3-decade-old law restricting the entry of power wholesalers into the state. The Florida Supreme Court ruled for the utilities, and Duke and other merchants planning to build certain types of plants have, for the time, shelved their plans.

When it comes to transmission, Florida has another problem. Out-of-state power can come from but one direction: north. Supporters of deregulation are swift to point out that tinkering with a $218-billion industry is bound to be painful at first and that while California's debacle will take years to solve, other states will learn from its experience.

As spring settles in, the Great Lakes thaw and half a dozen legislatures begin tinkering anew with deregulation plans, a less optimistic school of thought appears to be developing. "The California situation is so bad that it confuses people," said Harvard University energy economist William H. Hogan. "It scares people. It paralyzes people. . . . They learn the wrong lessons and do the wrong things to fix it."

Copyright 2001 Los Angeles Times

-- Swissrose (cellier3@mindspring.com), April 02, 2001