Shortage of Power Lines Looms

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Shortage of Power Lines Looms

By Peter Behr Washington Post Staff Writer Tuesday, February 20, 2001; Page A01

The nationwide move toward deregulated and restructured electric power service, experts say, is being undermined by a growing weakness in the U.S. electrical grid system: a shortage of high-voltage transmission lines.

Strained power-line capacity has added to California's energy woes, blocking the movement of surplus power from the state's south end to northern cities hit hardest by blackouts last month.

Crowded transmission lines are also heightening the risk of sharply higher electricity prices and power shortages in New York City this summer, energy analysts warn. The Washington region is one of the few in the country that is unlikely to be affected, because it is part of a strong, five-state power-sharing organization.

In other parts of the country -- around the Great Lakes, and in the Southeast and Northeast -- traffic jams in long-distance power lines threaten to undercut the very competition in electric service that is the purpose of deregulation. That will confront consumers with an increasing risk of electricity price shocks.

"The seeds of what has grown in California have been sown over the United States as a whole by our failure to keep up with our [transmission] infrastructure over the past decade," said Karl Stahlkopf, vice president of the Electric Power Research Institute, an industry-backed think tank in Palo Alto, Calif.

"As we look into the next decade, it gets even scarier," warned Stahlkopf. The institute predicts 20 percent to 25 percent growth in electricity demand in the next decade, but only a 4 percent increase in power lines and electric-grid equipment.

The mobility of power -- the idea that market forces would move electricity from areas with excess to areas with shortages -- is a fundamental assumption of deregulation. But it turns out that deregulation, as designed by most states, provides little financial or political incentive for generators or utilities to construct long-distance high-voltage transmission lines, according to Stahlkopf and other industry officials.

Transmission capacity is falling further and further behind the demand for power, said consultant Eric Hirst, in a report for the D.C.-based Edison Electric Institute.

That would not be so troubling if electricity service had remained a local business, with communities served primarily by nearby utilities responsible for both generation and transmission.

But long-distance power transmission can be essential in a deregulated system, by increasing competitive offers for customers, said Ken Rose, senior economist with the National Regulatory Research Institute in Columbus, Ohio.

Texas, for example, has ample generating capacity. But weak transmission connections with its neighbors make it impossible to share much of Texas's surplus with states short of power. New York, meanwhile, may have problems even though it is next to the PJM Interconnection, the five-state consortium that supplies power to the Washington area, because there is limited transmission capacity from PJM to the north and east.

When power can move freely within or between regions, generators in distant cities can compete with each other, Rose said. When bottlenecks occur, competition suffers and generators can push prices up in their home markets. "When you don't have enough transmission, it's easier for suppliers to exercise market power," Hirst said.

A major problem is that building transmission lines is fraught with political and financial challenges.

From suburbs to farms, the giant towers and the drooping lines they support are loathed and opposed. "It's easier to site a generation plant than to build a 20-mile transmission line through people's backyards," said Mike Calimano, vice president for operations of the New York Independent System Operator, the state's power grid manager.

"We haven't built any [transmission lines] from Canada or the West since 1978, and that was a war," said Minnesota Attorney General Mike Hatch. "We had highway patrols trying to keep the peace. It was awful then," and will be again as new power-line projects go forward, he warned.

Utilities often complain that the profit they are allowed to make on building transmission lines, as determined by Federal Energy Regulatory Commission rules, is too low to make the investment worthwhile, Stahlkopf said.

Transmission construction has also been frustrated by a split in regulatory responsibility. The Federal Energy Regulatory Commission (FERC), whose members are appointed by the president, oversees rates charged for transmitting power. But states have jurisdiction over where the lines are built.

Sen. Frank H. Murkowski (R-Alaska), chairman of the Senate Energy and Natural Resources Committee, will soon introduce legislation seeking to speed up transmission line siting, and some analysts say that can't happen unless the federal government takes control of final decisions. But such an approach would run into opposition from other members of Congress, such as Rep. Joe Barton (R-Tex.), chair of the House Commerce energy subcommittee, who argues that siting should remain a state responsibility.

In the meantime, the FERC has called on utilities to create cooperative Regional Transmission Organizations that would decide on transmission needs and encourage member utilities to build lines where they're needed. The FERC's deadline is Dec. 15, but the process is moving slowly in some areas of the country, particularly the Midwest.

Still another obstacle is the political and regulatory turmoil over deregulation. Utilities "are like deer frozen in the headlights, waiting for state and federal legislators and regulators to define the structure of the industry in which they will operate, invest and be regulated," Hirst said in his report.

A new group of "merchant" generating companies, including Duke Energy Corp., Calpine Corp., Reliant Energy Inc. and others, have bought utilities' generating plants in many parts of the country and could also fund transmission investments. But they, too, have difficulty predicting how such investments would pay off, analysts say.

"This grand experiment is going on, but the result is that nobody's investing now because it's far too uncertain," said Lawrence Makovich, a senior director at Cambridge Energy Research Associates in Massachusetts.

And utilities often have a powerful self-interest in dragging their feet on new transmission construction, said Illinois Public Service Commissioner Terry Harvill.

Commonwealth Edison, Chicago's major utility, has little incentive to build new long-line transmission connections, for instance, if that would make it easier for its customers to buyer cheaper power from competitors in neighboring states, Harvill said.

In fact, Commonwealth Edison has just built two major power lines from the south of Chicago to the city's western suburbs to serve customers, said Thomas Wiedman, director of transmission planning. He said he expects no electricity problems this summer.

Commonwealth Edison is obliged to build transmission if a competing generating company needs it, provided the generator is willing to pay for it, he said. "We can't build for free."

The fundamental reality, Harvill said, is that transmission in many parts of the country is no longer part of a regulated utility company's responsibility to serve customers. Rather, it is a major issue in the competitive struggle among utilities and generators, where profit considerations are paramount, he said.

Minnesota provides a case in point, said attorney general Hatch. The state urgently needs more transmission links beyond its borders to cope with a shortage of generating capacity in the state, he said.

The best choice, from the state's standpoint, would be new lines bringing inexpensive power in from Canada and North and South Dakota, he said. But no such projects have been proposed.

Instead, the two major transmission projects currently on the table would run eastward, enabling utilities to export power from Minnesota toward Milwaukee and Chicago, where it might bring twice the price, Hatch said.

"We have cheap electricity in this state. It is a huge economic benefit," he said. But if some of that power can be sold outside the state for a bigger profit, that's where it's going to go, Hatch warned -- and such moves could leave his state worse off.

New York City, which must import more than one-quarter of its peak electricity requirements through old, heavily loaded transmission ties, exemplifies the hazards faced by cities with small margins of electric generating capacity and limited transmission links.

Demand for electricity in New York City this summer is expected to peak at about 10,800 megawatts -- enough to light 10 million homes -- according to the state's electric grid manager, the New York ISO.

Add a requirement for another 2,000 megawatts of standby generating capacity in the city as an emergency cushion in case a plant fails, and the city needs to be able to draw on a total of 12,800 megawatts of power, the ISO says. Power plants in the city can produce about 8,000 megawatts at peak periods. The rest, about 4,000 megawatts, must be imported through New Jersey or from the north -- and that's just about how much power the transmission connections can carry, if all are working.

But two of three cables from New Jersey were not in operation last summer. With imports limited, the city ran short of power in June, resulting in a spike in electricity prices that cost consumers an estimated $100 million, according to regulators.

"If they hadn't had a cool summer last year, they'd have really paid the piper," Makovich said. The price escalation has led to the same political outcry and charges of generating company profiteering now heard all over California.

Across the Hudson River from Manhattan, crews will soon begin installing a new house-size transformer in Jersey City, the missing piece in the repair of one of the eastward power conduits to New York. The job will be finished by June, promised Paul Cafone, manager of systems operations for Public Service Electric & Gas in Jersey City.

"Seeing is believing," said Calimano, the New York grid operator, of his friend Cafone's assurances. Calimano also worries about the main transmission lines entering New York from the north. They haven't been upgraded or expanded since the 1970s, he said.

As long as the current transmission systems and the city's power plants hold up, "we should be able to survive the summer," Calimano said.

But if New York catches the California virus, analysts and regulators agree, there will be a dramatic demonstration of the nation's power transmission weaknesses -- and another blow to the public's confidence in electricity deregulation.

© 2001 The Washington Post Company

http://www.washingtonpost.com/ac2/wp-dyn/A27038-2001Feb19?language=printer

-- Martin Thompson (mthom1927@aol.com), February 20, 2001

Answers

TUESDAY, FEBRUARY 20, 2001

USA BOTTLENECK AT 'RUSH HOUR'

The other electricity crisis: transmission lines

By Ron Scherer (ron@csmonitor.com) Staff writer of The Christian Science Monitor

NEW YORK

Over the next five or six years, if all goes according to plan, there should be enough electricity to provide plenty of power for every American.

But with all the generating capacity, will electricity actually reach everyone who needs it?

The answer lies in transmission lines - those long, saggy cables strung between ungainly steel towers. They're part of the electricity superhighway that sends kilowatts flowing from places that welcome power plants to those that don't. And, unsettlingly, these lines are becoming congested, pushed to their limits, close to burning out during peak periods.

"It's probably the most vulnerable part of the system, if not the most important part of the system, and the one that people pay the least amount of attention to," says Thomas Kuhn, president of Edison Electric Institute (EEI), a trade group in Washington.

But building new transmission lines to ease the strain is not an easy task. People who live near proposed corridors for new towers, often joined by local environmental groups, have become effective at delaying or rerouting new lines. Landowners complain about lost property values and question whether the lines cause health problems. To some environmentalists, the steel towers can be an eyesore, ruining a mountain trail.

The tensions have not gone unnoticed in Washington. Sen. Frank Murkowski (R) of Alaska, chairman of the Energy Committee, is considering provisions to speed the siting of transmission lines. It's not yet clear if he'll proceed because of the potential controversy over such legislation, Senate sources say.

The siting controversy is heating up even as the lines are increasingly used to transfer power among regions. In just five years, power sales from one region to another jumped from 25,000 transactions to more than 2 million, according to EEI.

"The system was never designed for that," says Mr. Kuhn.

But building new transmission lines just to move power from one part of the country to another is a sensitive issue, particularly among landowners. Indeed, local objections have forced many power companies, including American Electric Power (AEP) Co. in Columbus, Ohio, to alter their plans.

When AEP said in 1990 it wanted to build a major new line from West Virginia to western Virginia, it knew getting approval would be arduous. The new line would cross the Appalachian Trail several times, as well as the New River - a route that would require approval from two state regulatory commissions and three federal agencies.

But more than tangling with the bureaucracy, AEP was also fighting an aroused local populace. One key objection was that power transmitted over the new line would not be used locally, but sold for use as far away as eastern Virginia or North Carolina.

"The transmission line would ruin landscape and property values," says William Dougherty, president of FORCE (Friends of Regional Culture and Environment), the local group that sprang up to fight AEP's proposal.

Eleven years later, the company has shortened the route, eliminating some regulatory hurdles. Even FORCE has grudgingly accepted that something will be built. "Keeping it short will help," says Mr. Dougherty.

The process, though, has consumed more time and money than AEP expected. The plan had called for the line to be in place by 1998. Now AEP hopes to have the juice flowing by 2005 - at a cost of $283 million, up $83 million from the original price tag.

Meanwhile, to cope with rising demand, AEP has installed load- shedding equipment that will let it institute rotating blackouts to protect its system. "The lesson you learn is you have to keep pace with demand - look at California," says spokesman Todd Burns.

In fact, transmission capacity is a serious problem for California. As part of a utility bailout deal, the state may take over 32,000 miles of wire - even though some reports show as much as $1 billion may be needed to upgrade the lines.

In particular, five power bottlenecks need to be corrected, according to the California Independent System Operator (ISO). One example: At transmission lines between Los Banos and Gates (outside of Bakersfield), three 500,000-volt lines are constricted into two lines - the equivalent of making a three-lane highway into two lanes at rush hour. On both days last month when California experienced rotating blackouts, these lines were operating at capacity.

"When we took control of the system, it was one of our biggest issues," says Lisa Szot, an ISO spokeswoman.

In this case, environmental groups are not protesting. "It's fairly short and an area not likely to create a lot of disturbance except on some agricultural lands," says Rich Ferguson, director of energy programs for the Sierra Club, based in San Francisco. He says the club is not opposed to transmission lines per se, but looks at them on a project-by-project basis.

"We'd like to see better use of wind power in the Dakotas - and if that means more transmission lines to supply Chicago or Detroit, we might support it," he says.

Some states are net importers, relying on surrounding states for power.

That's the case with Wisconsin, which imports about 15 percent of its power during peak periods. Demand continues to grow at almost 5 percent annually in urban areas, says Larry Borgard, vice president for transmission at Wisconsin Public Service. Until new plants are built, electricity to meet that demand must flow over congested wires.

To prevent blackouts, WPS and Allete (formerly Minnesota Power) hope to upgrade the connection to Minnesota at a cost of $175 million. The company plans to complete the new line in 2004.

Wisconsin may be in the vanguard of electricity transmission. Last year, the local utilities spun off the transmission assets into a new company, American Transmission Co., which now controls 6,000 miles of wire and 500 substations. It's hoping to make money not only providing Wisconsin with power but also shuttling electricity from power generators in South Dakota to energy consumers in New York.

"It's up to us to make it a business," says Jose Delgado, the president. "If we're successful, it will show Congress and other utilities that divestiture should take place."

http://www.csmonitor.com/durable/2001/02/20/fp3s1-csm.shtml

-- Martin Thompson (mthom1927@aol.com), February 20, 2001.


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