Friday, August 13, 2004

When It Comes to Power, Reliability Matters Most

IBM consultant Jeff Pratt was working in Detroit on August 14th, 2003.  He was on a conference call to New York and Toronto when, at 4:11 pm, the lights and telephones went out in all three cities.  Some ten minutes later, he and his colleagues reestablished contact using their cell phones.  That’s when the trio discovered what we in West Virginia already knew-the northeast power grid had inexplicably shut down.

With his workday over, Mr. Pratt called home to Doddridge County and asked his wife to search the internet for the cities nearest to Detroit that still had power.  Using his vehicle’s onboard navigation computer, he quickly calculated that he did not have enough fuel to drive out of the blackout zone.  With no electricity to run the pumps, buying gas was hopeless.  The trip home to his Doddridge County farm would have to wait.  

NASA Image

Twenty-five years ago, James Burke introduced his award-winning series, Connections, by holding up the failed relay that caused the 1975 New York City blackout. He began episode one, "The Trigger Effect", by listing all of the technologies that failed when the power went out. Mr. Burke needed only the next five minutes to take his viewers some 7,000 years backwards in time to the invention of agriculture in the Nile Valley. This was his starting point for the series--the logical conclusion of not having electricity and the technologies that we have come to rely on.

During the ten episodes of Connections, Mr. Burke illustrates the thousands of observations, inventions, and coincidences that it has taken to build our modern civilization. Here in West Virginia, we take steam-generated power for granted. But Mr. Burke points out that our first knowledge of the physics of steam came from Scotch whiskey distillers, not scientists. Following those discoveries, it was only by coincidence in 1763 that Scotsman James Watt was given the task of modifying one of Thomas Newcomen’s steam engines. Watt’s improvements ushered in the age of steam power.

Just think--it took well over 6,000 years from the invention of agriculture to the invention of steam-powered threshing machines. From James Watt’s invention, it then took another 200 years to build "Big Allis", Con Ed’s 1,000-megawatt steam turbine. As the wily James Burke shows us, we really are just 5 minutes away from the beginning of time.

On first reading, this may seem a convoluted segue to the topic of electric power deregulation. But first, I wanted to emphasize just how dependent we are on electricity. So I challenge you to name one job that does not rely on electricity, either directly or indirectly. And please, don’t answer "LearnĂ©d Hippie" or "Amish Farmer."

Seven years ago, the Public Service Commission appointed a task force to study electric restructuring (deregulation.) The task force generally approved of restructuring and listed several benefits to consumers. But the report also contains several nagging questions, not the least of which was how to compensate AEP and Allegheny Power for $1.5 billion in stranded costs.

My take on this report is that the task force talks out of both sides of its mouth. At one point they say that we should deregulate the existing electric industry because it is beneficial to consumers. Then they whisper hints that we will likely need to implement a whole new set of regulations in order to guarantee adequate supply and fair pricing once the industry has been "restructured." Deregulation, indeed!

We’ll never know where all of this was headed because the California power crisis and Enron changed everyone’s mind about deregulated electric service. We should thank Gray Davis for diving on the grenade or, in the alternative, Ken Lay for lobbing it in his direction.

As you know, I am a crusader for free and open markets. In the case of the electricity market, I must confess that I have never understood any of the arguments in favor of deregulating the electric industry. But then again, I’m an idiot. I go from room to room during a power outage flipping light switches and have to remind myself each time why the lights don’t come on.

And this is my point. The price of electricity means little. Reliability means everything. If you doubt me, then ask Jeff Pratt. He’s a consultant.