The size and scope of the 2003 blackout has and will continue to garner major media attention. Federal and state regulators have snapped to attention and will continue to probe what went wrong, why, when and how. Congressional hearings will keep attention focused on the issue even as investigators plea for patience as they sort through an estimated 10,000 pages of data relating to the events of the day. While the immediate aim of the investigation is to find out what went wrong on August 14, moreover, a more important long-term result may be the shedding of light on problems the electric utility industry has faced for decades.

...What a Long, Strange Trip It’s Been
A final determination of what actually happened on the afternoon of August 14 will take some time, but early reports place the origin of the outage in northern Ohio, just south of Cleveland, where a 680-megawatt coal generation plant owned and operated by FirstEnergy shut down that afternoon for still-unexplained reasons. Shortly thereafter, three transmission lines in and around the area started “tripping” out. Lines “trip” or shut down briefly for any of a number of reasons, usually related to ebbing voltage caused by a power overload, a tree falling on a line or even a bird hitting the line with sufficient force.

What investigators really want to know, though, is how these transmission line outages in Ohio cascaded into a power blackout that stretched from Toronto to New York City and left tens of millions of electric customers in the dark. What appears to have happened is that within minutes – sometimes within seconds – successive portions of the interconnected transmission grid of Ohio, Michigan, Ontario and New York began shutting down, a response to imbalances of supply and demand on the grid. Essentially the grid must always remain in balance – supply of electricity must equal demand, and when a line or power plant loses load or faces a power surge, it disconnects from the grid so as not to overheat or overload.

“The fail-safes are like circuit breakers in your house,” explains Philip Mihlmester, a consultant with ICF Consulting, a firm that has studied the nation’s electrical transmissions systems for years. “It’s like if you plug 14 appliances into one circuit and try to run them all. Either the circuit is going to blow or your house is going to burn down, because that one circuit cannot handle all that power demand.”

The national electric grid, though, is not quite the same as household wiring. Once a “circuit” – a transmission line or power plant – goes off-line, power that formerly rode that corridor now tries to find the path of least resistance to get to where it needs to go. This boosts current on neighboring lines, which must not only carry their native load, but accept the overflow from lines that are down. Early reports of the events of August 14 cite at least one line that was so overloaded it overheated and sagged into a nearby tree, thus knocking it out and passing its overload to the next line. Before long, this type of cascading effect knocked out lines throughout northeastern Ohio.

Once enough lines are down, moreover, power flows may start to reverse on the system. Thus as northern Ohio lost power, the normal Ohio-to-Michigan-to-Ontario flow was reversed, with electrons charging down from Ontario into Michigan in an attempt to fill the vacuum left by lack of outgoing power from Ohio. This unexpected power surge (reversal) into Michigan knocked out several Michigan plants and lines, and soon Ontario’s system, with nowhere else to send its power, started exporting to New York, another neighboring state similarly unprepared to accept incoming power flows. New York’s system may or may not have tried to shut itself off from Ontario – investigators are still debating this – but what is known is that by just after 4:00 pm, a mere hour or more after the first signs of trouble appeared in Ohio, New York power plants started going dark. Within seconds, the New York ISO lost some 80 percent of its load as its plants began shutting down. Thus within a hour - according to the earliest published reports – line failures in Ohio had rippled through the grid to knock out more than 100 power plants in at least four states and the province of Ontario.

...Alarming Trends A perplexing and still-unresolved question is whether the blackout could have been contained to Ohio, particularly if the right alarms would have been sounded on FirstEnergy’s system. At least one class-action lawsuit has already been filed claiming that it was the lack of functioning alarms that turned a what should have been contained spot outages into the biggest electrical outage in North American history. FirstEnergy officials won’t comment, citing the ongoing investigation into what went wrong. Other utilities or independent systems operators (ISOs) that were part of the event are similarly mum – no one wants to say what went wrong until the facts have been reviewed.

Experts who will speak on the subject, though, say the focus should be less on the origin of the blackout and more on its spread and eventual scope.

“Everyone should be more concerned with why a series of events that should have been contained cascaded in this way,” says Hoff Stauffer, a senior consultant at Cambridge Energy Research Associates. “We won’t be able to design systems that are not going to have the problems that FirstEnergy had on August 14. But what we can avoid is where one area’s problems feed into another area and another area and another area.”

Early blame for that cascading effect has focused on a number of interrelated issues. First, too many transmission lines in too many parts of the country are overloaded and lack sufficient marginal capacity to handle excess load if a neighboring line goes down. That, in turn, is directly related to the fact that investment in the nation’s transmission infrastructure has lagged demand for years. The Edison Electrical Institute (EEI) reports that transmission investment in the U.S. has fallen $115 million per year for the past 25 years, from about $5 billion in 1975 to $2 billion in 2000. During that same time period, EEI notes, both the overall demand for power and the demand for power quality have risen and continue to rise.

Transmission owners are also faced with what is often referred to as the “NIMBY” (Not in My Back Yard) problem, where taxpayers vote against any and all electric utility initiatives that come too close to home. George Gross, a professor of electrical engineering and public affairs at the University of Illinois, says the issue is so hot in some states that the acronym needs to be changed to NANA – Nothing Anywhere Near Anyone.

In addition, open access provisions enacted over the past decade require transmission owners to offer transmission to competing companies at mandated prices. The result is an under-funded, aging and overloaded transmission system that was never designed or intended to be used the way it is today.

“The grid was designed to handle native loads, native customers,” says Luther Dow, director of power delivery and markets for the Electric Power Research Institute (EPRI). “Now we are having utilities carry load for others. We are asking the grid to do things it was not supposed to do. Transmission owners cannot keep up. If we are going to do this, we need new tools to help the operators manage the system better.”

Among the improvements Dow would like to see are more and better alarm systems to move to a completely “self-healing” grid. The nation’s transmission system, he says, also needs more lines in highly congested areas, uniform rules and regulations and tighter integration of communications between system operators. EPRI has called for investments of up to $100 billion in new nationwide transmission systems, and Dow makes the case that even in challenging economic times the nation must invest in its infrastructure if it hopes to avoid future blackouts. “Load growth over the past decade has been 35 percent while growth in investment has been 17 percent,” Dow says. “If we don’t increase investment, there is no way we are going to be able to keep up with demand.”

“A major outage was bound to happen at some time,” adds Robert Michaels, a professor of economics at California State University Fullerton and consultant to electric utilities, regulators and independent power producers. “All you have to do is look at the number of stage-two outage alerts we have seen over the past five years. Transmission operators are scrambling to meet demand on facilities that have been neglected for years.”

...Costs and Repercussions
Early estimates put the overall cost of the outage at between $4 billion and $6 billion, hardly a ripple in a national economy of over $10 trillion. Hardest hit were the electric utilities themselves, airlines, cities and smaller retailers who lost business for the day or a few days. David Wyss, chief economist at Standard & Poor’s, calls the blackout “a minor nuisance, as opposed to a major disaster.”

By way of comparison, the Insurance Services Offices, a company that tracks the cost of natural and man-made disasters, estimates the cost of the September 11 terrorist attacks at $20.7 billion, of Hurricane Andrew in 1992 at $19.9 billion and of the 1994 Los Angeles earthquake at $15.2 billion.

The blackout may even turn out to be of economic benefit to the electric utility industry as a whole, particularly the transmission sector. It has highlighted electric reliability concerns, as witnessed by investigations announced by Congress, the U.S. Department of Energy and Canada’s Department of Natural Resources. Stephen Fleishman, global coordinator for power and gas for Merrill Lynch, says one result could be passage of a National Energy Bill before the 2004 elections. At a minimum, Fleishman says, renewed attention to reliability means utilities themselves will plow more money into transmission. Regulators and the general public, Fleishman adds, may be more open to rate increases, tax credits or other funding mechanisms to help fund transmission upgrades.

Many also predict the blackout will lead to the passage of national reliability rules for the transmission grid. “The reliability rules need to be mandatory as opposed to voluntary, and they need to be national rather than based on what each state does,” says Phillip Lookadoo, a partner in the electric utility practice of law firm Thelen Reid & Priest. “Clearly, the voluntary rules have not worked.”

Fleishman says national rules would also appeal to investors, specifically those interested in investing in interstate transmission. “Investors like certainty,” he notes. “Federal rules would add a lot more certainty than we have now.”

William Museler, president and CEO of the New York ISO, calls for mandated Federal reliability standards as well as improved incentives for siting new transmission. “New York’s transmission grid needs to be strengthened,” Museler says. “Current incentives for building transmission are inadequate, the state’s transmission siting law can be further streamlined and, in the case of interstate facilities, a federal override may be appropriate.”

Perhaps most importantly, the lights going out on Broadway on August 14 – in this case in rather dramatic fashion – serves to remind both politicians and the public just how dependent we are as a nation on electricity.

“When you can’t go up and down in your elevator, can’t get water, can’t get your car out of the garage, you are reminded how important electricity is,” says James Serota, a shareholder and head of the antitrust department of Greenberg & Truarig, and principal author and editor of The Energy Antitrust Handbook. “This was a wake-up call that should result in significant action.”

“I consider this a watershed event,” adds Richard Michelfelder, assistant professor of finance at Rutgers University and former executive at electric utility Atlantic Energy. “There are folks that are concerned that this will fade into the woodwork, but I cannot imagine that to be the case. It wasn’t just a particular city like it was in Manhattan years ago. It was a big deal and it was international with Canada involved. The attention will not wane. Investment will occur and changes will happen. As to how much and how many years will go by before we see this, that remains to be seen.”