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U.S. Grid Gets Less Reliable: Page 5

Glimmers of Hope for the Grid

The issue of freeloading use of the grid by energy producers now has the full attention of the Federal Energy Regulator Commission. In late July 2011, it issued a new federal rule requiring grid expansion be paid for only by those who benefit from it, and guaranteeing that costs align with benefits as the country seeks to upgrade and expand its power-transmission infrastructure.

However, the same day as the new rule was announced, a number of “stakeholders” asked the U.S. Senate to oppose it. Clearly this will take a long time to sort out.

Hackers are Another Threat

And, in a perverse turn of events, the grid may be less reliable because of the very technology that has been implemented to make the grid “smarter” and more efficient. The design point for the earliest smart grid devices -- ease of use and interoperability -- makes it far too easy for anyone to maliciously hack the grid. In fact, there has been at least one hacking attempt coordinated from China, according to the Wall Street Journal (“Electricity Grid in U.S. Penetrated by Spies, April 8, 2009).

The Root Problem is Electrical

Deregulation of a number of industries has shown that price competition ultimately helps the consumer. But power transmission is a unique problem, because of the very nature of electricity.

Power flows throughout transmission networks along paths of least impedance, regardless of contractual obligations or political boundaries. Bulk power distribution decisions made by regulators in one location can conceivably have some impact on everyone in Canada and the U.S. Deregulating power generation only works if the power providers pay the real cost of supplying, including transmission.

Finally, in 2007, the FERC (Federal Energy Regulatory Commission) acquired the authority (delegated to the NERC, the North America Electric Reliability Corporation) to fine operators who don’t hold to standards. (However, it is instructive to note that, even today, some reliability standards have not been completely defined by NERC.)

So, part of the problem is solved, because one entity (NERC) has responsibility for defining and regulating reliability. However, after-the-fact enforcement, without the power to compel who will pay for grid projects, is insufficient. The Public Utility Commissions in 50 U.S. States, also exert considerable control over who pays for what, even though it has been obvious for some time that costs can be shifted from state to state. An MIT study comments:

Electric power industry policy is a hodgepodge, rooted in the federalism of 50 state laboratories. There is no coherent national vision and policy.

To take the best example, also from that MIT study:

Allocation of grid expansion project costs is often the most contentious issue a proposed high voltage transmission project encounters. Difficulties increase geometrically in proportion to the number of states involved.

The grid needs to be managed with one steady hand. Grid management and planning must include funding (and therefore chargeback) decisions, particularly when the average high-voltage transmission line takes 14 years to gain approval.

As it stands currently, FERC and its appointed agent, NERC, face the daunting challenge of herding 50 regulatory agencies. NERC does not have the authority to mandate cost allocation of grid-related costs back to any power, distribution or transmission company in U.S. and Canada. And granting it the authority to do that is not on the horizon. Until that happens, the sheer complexity of the political situation will mitigate against an effective solution.

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