|| Briefly, what was the difference between
what occurred on the East Coast and what happened two years
ago in California?
Our situation was quite different from that
in the East. The outages we had were controlled – so-called
rolling outages that were for short, predictable periods of
time. In the East it was a complete system failure. Hearings
on the cause of that failure began earlier this month.
In 2001, California had power, but transmission was inadequate.
The connections between the northern half of the state and
the south were too weak. Everyone knew that the crisis was
coming. The signs were all there and everyone knew where the
outages were most likely to occur.
Until recently, California had not built any major new power
plants in more than 20 years. As we grew, we became more dependent
on power markets. Hence the need for those transmission lines.
||Was deregulation to blame?
No. The state’s deregulation law was
a political compromise that disregarded the basic economics
of the industry. Deregulation replaces utilities with markets,
but California’s problems were inadequate supply, growing
demand and bottlenecked transmission. For its mistakes, California
now has a legacy of high prices, but elsewhere markets are
functioning well. Nationally, the real price of delivered
power has fallen nearly 30 percent in the last 10 years, and
we can credit a lot of that to the market. Other people have
choices and are using them – 25 percent of all the households
in Pittsburgh have found better bargains than their old utility.
||Could the situation happen again?
Do the math. In 1975 the U.S.
spent $5 billion on high-voltage transmission. Last year,
it was down to $2 billion while electrical use has doubled.
I’m not very hopeful because no one in Washington really
wants to face the big issue.
State governments authorize the construction
of new lines and the paths they can take. They have no desire
to transfer that control to Washington despite change in the
industry. The Federal Power Act of 1935 left authority to
the states, since most utilities at the time were small, self-contained
systems and little power crossed state lines. Now most of
the power that matters does. As we speak, power is arriving
here from South Dakota, Northern Alberta and Baja California.
I prefer local control for those activities
that affect only local interests. But electrical flows between
California and Arizona affect power costs everywhere in the
West. A state that blocks new lines imposes costs on residents
of other states. Locals should have a say over transmission,
but all too often they abuse environmental law to protect
their own interests. A nation that has not built any major
transmission since 1995 needs a federal backstop with eminent
domain powers. And delay feeds on delay. The Valley-Rainbow
line in San Diego County has just seen its 10th year of planning
and permitting, and over the interim new towns and new protestors
have sprung up in its path.
The federal government controls the siting
of interstate gas pipelines, and there have been no comparable
problems in delivering it.
State electricity regulation in effect allows
governments to tax and subsidize different power users and
environmental interests without the need for legislation.
State regulators have lots of friends in Congress, and my
bet is that the emerging energy bill will not make the needed
changes. But without those changes, all the legislation in
the world will add very few new wires to the system.