fedgazette

Letter to the Editor

Published March 1, 2008  |  March 2008 issue

To the editor:

Your November article, "Grid and bear it," accurately describes what the new owners of our increasingly unregulated transmission lines and power plants want: a beefed-up long-distance transmission system that enables a national electricity market. But the author implies that what they want is good for us all. That is problematic.

To understand why, we need to do what the author fails to do: explain how we got here and the different futures we might pursue.

For 70 years, the U.S. electricity grid was the envy of the world. It was designed to deliver electricity from local power plants to local customers. High-voltage transmission lines carried bulk power, but cross-border flow lines were modest.

In 1978, Congress ended the utilities monopoly on electricity generation, but new generators had to sell to the local utility. This created a useful and healthy competition. But the independent power industry, which increasingly included utility subsidiaries, wanted to sell into a national market and, ultimately, directly to large customers. In 1992, driven by a massive lobbying effort by Enron, Congress deregulated the wholesale electricity market. In the following six years, almost half the states deregulated the retail sale of electricity.

FERC [Federal Energy Regulatory Commission] has increased the profit they can make on new lines. The Department of Energy has begun to designate national emergency corridors in which federal approval for new power plants and transmission lines preempts state and local authority.

This experiment in deregulation has produced little, if any, financial benefits. Recent studies conclude that electricity prices have increased faster in deregulated states. The new wholesale market also appears to be lifting prices because of the way prices are now established. Moreover, the new wholesale market has proven itself vulnerable to manipulation. Witness the near bankruptcy of California as a result of the manipulation of electricity supplies by Enron and others.

As the article notes, the argument for new high-voltage transmission lines is to eliminate bottlenecks. But the mere existence of constraints does not constitute an emergency, but rather informs us about the operating limits of the grid "machine." This is similar to a temperature gauge on a car that warns us if we are pushing the car beyond its design capability. The question is, How do we react to this signal?

The author asserts, "Numerous smaller constraints within utility service areas cause headaches for utilities and independent generators trying to wheel power through the region." But it is the wheeling of power through a region and among regions that causes local constraints. A distributed generation strategy—that is, smaller power plants that meet nearby demand—eliminates these bottlenecks at a far lower cost than building new transmission lines.

Indeed, a recent study conducted by Minnesota's utility transmission engineers concluded that several thousand megawatts of new power—more than enough to meet Minnesota's needs for the next 15 years, including its new renewable energy standard—could be injected into the existing subtransmission grid system. And doing so would save over a billion dollars in avoided construction costs.

David Morris
Vice President
Institute for Local Self-Reliance
Minneapolis

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