Friday, August 15, 2003

More on the political economy of electricity and the blackout, from today's NYTimes:
While energy experts disagreed on the precise cause of today's power blackout, they were in agreement that the extensive failure betrayed the age of the region's transmission system and its failure to keep up with demand. . . .

"We've got excess power in upstate New York, but there's no way to get it to New York City because of the bottlenecks," said Denise VanBuren, vice president of Central Hudson Gas & Electric, which supplies power to eight counties north of New York City. "It's very difficult in this economy to get financing for a major transmission line, and we've been concerned for a long time about the region's transmission capacity."

With only a limited number of high-voltage lines, a power failure can spread more quickly when generators try to send their power to areas that need it, overloading the lines that remain. . . .

The problem of preventing such power failures has been that, for the most part, no one has an incentive to invest billions of dollars in new wires, new towers and new transformers. The old utilities have sold off their power plants but still hold a highly regulated monopoly on the network of lines, and they would only invest in new transmission if state regulators would guarantee them rate increases to pay for it.

That is the last thing the regulators, who deregulated much of the industry in hopes of lowering rates, would be willing to do. The entrepreneurial power companies that have bought up power plants have decided against building new transmission lines that would compete with existing ones, possibly driving down transmission charges, and would, at most times, be nothing more than "excess capacity."
And here's the kicker:
Analysts said additional disruptions are quite likely as the economy begins to strengthen and demand for electricity increases.

"If the economy grows at 3.5 percent a year for the next several years, I would not be surprised if we don't have interruptions on a scale that is not acceptable to most Americans," said Irwin Stelzer, director of economic policy studies at the Hudson Institute, a conservative research institute.
Ah, the contradictions of capitalism.

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