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Ensuring the
Reliability of Highlights
of a Hearing By The By Patrick Meyer Wednesday, 8 June 2005 - The House Committee on Government Reform's subcommittee on Energy and Resources met to discuss measures that should be taken to ensure the reliability of the electric power system of the United States. With the possible coming of the first national energy legislation in years, electricity reliability is a pressing issue. According to subcommittee chairman Darrell Issa, reliability will become even more imperative in the near future. He pointed out that some estimates show that electricity consumption will increase by 45 percent by the year 2025. Additionally, Issa identified a more immediate problem residing in the reports that California will be facing a slew of damaging blackouts during this summer's peak months. Witness Pat Wood, Chairman of the Federal Energy Regularly Commission (FERC), explained that such blackouts are due to a serious under-investment in transmission infrastructure. This under-investment has led to increased transmission congestion and decreased reliability on a widespread basis. Wood argued that there should be a hefty increase in infrastructure investment along with an increase in fuel diversity so as to benefit everyone – consumers and companies alike. Wood also pushed for new clean coal and more nuclear power developments – but explained that these would probably need to be located distant from cities, which would require more robust transmission systems than what is in place today. In his final words, Wood stated that he looked forward to the day that he could have 21 different electricity providers to chose from – some traditional, some renewable, and some mixed. According to witness David Owens, Executive Vice-President of the Edison Electric Institute (EEI), institutes and organizations such as his own, have brought the energy legislation to its current point and now "congress needs to finish the job." Owens outlined a number of measures he would like to see in the coming energy legislation so that the "job" is finished in the favor of EEI's interests. Owens argued to give facility siting authority to FERC – along with transforming the permitting process on federal lands to give FERC more authority. Owens also argued for opening transmission lines to any third party seller, regardless of production source. Finally, Owens argued strongly against mandatory Regional Transmission Organizations (RTOs). Dr. Mark Cooper, the Director of Research of the Consumer Federation of America held a considerably different point of view from FERC and EEI's "market philosophy." He insisted that "electricity is like oxygen," "reliability of that electricity is a public good,..." and argued that in order to ensure a necessary supply of this public good, there needs to be a proper balance between social responsibility and for-profit market investment. Cooper was persistent in arguing that engineers should study the grid to figure out where to build new facilities – that the engineers know where to build, not the economists and market advocates. On the issue of siting new facilities, he argued that the ultimate say should be up to the people of the community in which that facility would be built. He points out that in order for the people to accept any plan for a new facility they need to be convinced that 1) they really need it, 2) this is the best option in fulfilling the need for it, and 3) they have had a chance to present their point of view in the process. The controversial repeal of the Public Utility Holding Company Act (PUHCA) arose in all of the witness's testimonies. Wood insisted that the repeal of PUHCA is well overdue – that there are now protections in place that were not in place in 1935, and these protections will ensure that a non-PUHCA America functions properly. He pointed out that the repeal of PUHCA would spur investment and facilitate competition. When asked by the Chairman about the accuracy of Warren Buffet's estimate that $10 to $15 billion new profit can come from the repeal of PUHCA, Wood was hesitant to agree to a dollar figure, but stated that the repeal of PUHCA would allow four companies in different states to join together and save considerable amounts of money. Owens agreed with this, stating that congress should repeal PUHCA and replace it with modern legislation. He insisted that PUHCA currently acts as a major impediment to infrastructure investment. Contrary to the views of FERC and EEI, Dr. Cooper argued that PUHCA was created, and still exists, for a reason. He insisted that PUHCA should not be repealed because repealing the 70-year-old legislation will cause consumers to lose a considerable amount of money. It is obvious, no matter what side one is representing, that the American electricity infrastructure needs work. According to Jack Holodak, speaking on behalf of his fellow engineers in response to an EnergyPulse article in late 2004, "when it becomes evident that we can no longer postpone system investment we must be prepared to a) show that the engineers predicted problems consistently over the years (else surely they will be blamed), b) support estimates that provide world-class best practices, scale economies, network design, maintenance and IT architecture, and c) compete successfully for our share of the margins with other stakeholders (finance, management, marketing, regulators, etc.)." To fulfill these three points, Holodak suggests that advocates publish their points of view so that gifted entrepreneurial engineers absorb and respond to the projections. He also makes a suggestion that is more applicable to this period of tight schedules: write to your Senators and Representatives. Well-timed opinion letters can have a tremendous impact on the ultimate outcome of the coming energy legislation. IEEE-USA's 2002 "Electric Power Reliability Organization" position statement is in agreement with Wood's argument, stating that the decline in electric reliability 'is a consequence of under-investment in needed infrastructure to meet growing customer demands". In the position statement, IEEE-USA also explains its support for Congress's passing of essential reliability legislation – including legislation that empowers FERC to create a self-regulating reliability organization known as the ERO. According to IEEE-USA's 2004 " Principles for a Restructured Electric Industry" position statement, "means and incentives for the effective planning, construction, operation and maintenance of transmission system infrastructure should be incorporated into all market structures. Coordinated generation, transmission and distribution development is essential to assure reliable operation and enable minimization of costs." Most importantly, the division of responsibility between state and federal authorities must be clearly defined to ensure the reliability and efficient performance of the system. Although PUHCA reform is one of the most controversial concerns of the current legislation, IEEE-USA has yet to take an official stance on the issue. About the Author:
Patrick Meyer holds a Bachelors of Science degree in Public Policy with a concentration in Energy Policy from the Rochester Institute of Technology (RIT). He is currently working as a summer 2005 intern with IEEE-USA's Energy Policy Committee. As part of the internship, he will be attending all energy-, electricity-, and resource-related hearings on Capitol Hill and will provide summaries of each hearing on this website. Patrick will be returning to RIT in September to obtain his Masters of Science in Science, Technology, and Public Policy. | Top of Page | Electric Reliability | Priority Issues | Policy | Legislative Action Center | IEEE-USA | Last Updated:
14 June 2005 Permission to copy granted for non-commercial uses with appropriate attribution. |
