March 2005: Another Blackout Looming

Government inaction could leave millions in the dark again soon
March 1, 2005

Unless the U.S. and Canadian governments act soon, many of us could be sitting in the dark again as we were during the blackout of August 14, 2003 that shut down much of the U.S. Northeast and Ontario, Canada. Both governments are failing to protect us from electricity blackouts. They are sitting on a recommendation made by their own joint blackout task force to commission an independent study of the contribution of electricity deregulation to blackouts. Unfortunately, even though no such study has been undertaken, the U.S. government and several U. S. states and Canadian provinces are moving ahead with electricity deregulation and restructuring without considering the problems such policies could cause.

Deregulation was fingered by presenters as the culprit during hearings by the U.S.-Canadian Power System Outage Task Force on the August 14, 2003 electricity blackout. They pointed out that the electricity system is run down because deregulation dangled big Enron-sized dollars in front of utilities, which, instead of attending to infrastructure, chased electricity trading money.

There wasn’t enough concern about controlling all these new deregulated companies. The old regulated utility companies, which used to look after the system, were broken into pieces and sold off to big energy holding companies.

Prior to restructuring and deregulation, the goal of utilities was reliable service at minimum long-term cost. In contrast, the goal of newly restructured organizations in a deregulated environment is short-term profit with little concern for the overall system. This has resulted in the shedding of 200,000 workers in the U.S. and Canada, losing their expertise needed to run the system, and reducing training and vital equipment maintenance.

Other jurisdictions have also noticed the devastating effects of deregulation. Pointing to the origins of Italy’s September 2003 nationwide blackout, the Swiss Federal Department of Energy said that “the underlying causes... are the unresolved conflict between the trading interests of the involved countries and operators, and the technical and legal requirements for safe and reliable operation of the networks.” Simply put, deregulation has made a mess of the electricity system.

After examining reports on deregulation’s contribution to blackouts, the joint Task Force called for commissioning “an independent study of the relationships among restructuring, competition, and reliability.”

“Restructuring and competition” is a euphemism for deregulation. Unfortunately, an August 13, 2004 status report of Task Force recommendations ignored the independent study recommendation, even though the report claimed to include actions taken and challenges ahead.

On September 7, 2004, however, Nawel Kamel, Canadian Co-Lead of the Task Force, responded to questions on the independent study’s status by stating that “work on this recommendation has not been initiated yet” and that “this is a subject on which there can be divergent and strongly held opinions.”

These remarks imply that ideology or politics could be getting in the way of the duty of our respective federal governments to protect us from the loss of electricity—an essential. On November 29, 2004, the Canadian National Resources Department again confirmed that it had “not yet decided on the course of action” for the independent study.

Americans and Canadians need an investigation that looks at the contributions of government deregulation policy to the cause of devastating blackouts. It’s important to our security, our safety, our health, and our economic well-being. We need to radically reduce the risk of future blackouts. Only by studying and understanding this problem can we fix it.

We call on the governments of the U.S. and Canada to put politics and ideology aside and commission an independent study of deregulation’s effects on electricity reliability. We also ask that federal, state, and provincial governments put deregulation plans on hold until we know whether or not we are headed in the right direction.

(Tom Campbell is a former chairman & CEO of Ontario Hydro; Jack Casazza is a member of Power Engineers Supporting Truth, a former utility executive, and a winner of national and international awards for development of electric power systems; Marjorie Griffin Cohen is an economist and Professor of Political Science at Simon Fraser University and a former board member of British Columbia Hydro; John Wilson, P.Eng., is a former board member of Hydro One; and Carl Wood is a former Commissioner of the California Public Utilities Commission.)