GRID FAILURE PREDICTED

The blackout that hit the northeastern United States and parts of

Canada yesterday exposed the steadily growing vulnerability of

the nation's nearly 200,000-mile network of high-voltage

transmission lines, say experts. The North American Electric

Reliability Council (NAERC) -- the industry advisory and watchdog

group over the transmission system -- warned last year, "The

nation is at . . . a crisis stage with respect to reliability of

transmission grids."

David Cook, NAERC general counsel, told Congress two years ago:

"The question is not whether, but when, the next major failure of

the grid will occur."

Electricity deregulation over the past decade dramatically

increased the volume of power flowing on the grids -- however,

investment in transmission lines dwindled.

o The Electric Power Research Institute in Palo Alto,

Calif., estimated that while power demand has shot up 30

percent in the past 10 years, transmission capacity has

increased by just 15 percent.

o The Reliability Council calculated that $56 billion was

needed to upgrade the nation's grids, but only $35 billion

was likely to be invested.

o Energy companies lack incentives to build new transmission

capacity because power transmission is tightly regulated.

o The Federal Energy Regulatory Commission (FERC) is pushing

power companies to form multi-state regional grids with

authority over planning and system reliability measures --

regulated by FERC, whereas some experts and utilities

prefer market regulation.

The move toward deregulation has also exposed NERC's limitations,

says utility consultant Peter Fox-Penner, particularly its lack

of enforcement powers to detect and stop generators from abusing

the grid with unscheduled power deliveries.

The House and Senate energy bills -- now in conference committee

-- contain reliability measures; but NERC warns that heavier

federal regulation would make matters worse.

Source: Peter Behr, "System's Crash Was Predicted," Washington

Post, August 15, 2003; James Jelter (Reuters), "Blackout betrays

ailing North American power grid," August 14, 2003; "Legislative

Action Is Needed to Maintain Electric System Reliability," North

American Electric Reliability Council, August 2003.

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