How Much Safety and Reliability Is Enough And How much are We Willing to Pay For?

Almost every hour of the day and almost every day of the year, our electrical system provides the power that consumers and industry need and expect. But, as we have learned from blackouts over the past 20 some years, from weather related outages, and now from reports of attacks on substations and transformers, that is not good enough. The system is vulnerable and more so than it needs to be or should be.

This reality should not come as a surprise to anyone. As far back as the early 90s, it was clear that changes in the make up of our economy and population growth would require more electrical power and more attention to making our electric power system robust and resilient. It was also well known that the electric power infrastructure – much like the rest of our nation’s infrastructure – was not keeping up with advances in technology, mainly because users didn’t want to bear the costs.

Public Utility Commissions, which exert economic control over electric power companies, don’t force costly upgrades because of potential political repercussions. The power companies face conflicting incentives as a result of control by state and federal agencies, the need to reward investors, and the importance of keeping customers relatively satisfied. Although power companies have been investing substantial sums in infrastructure and technology, some like Forbes have concluded that on a nationwide basis “we have been investing less in the system than it would cost to maintain it.”

A National Academy of Sciences (NAS) 2007 report, Terrorism and the Electric Power Delivery System, that was a classified as a national security document by the Department of Homeland Security has now been made public and it is alarming. Although the report focuses primarily on terrorism, it identified a number of improvements needed to improve reliability and make the national grid system more robust.

NAS was clear on the nature of the problem and the challenges in addressing it. It described the system as “remarkably complex. …a network of substations, transmission lines, distribution lines, and other components that people can see as they drive around the country; it also includes the less visible devices that sense and report on the state of the system, the automatic and human controls that operate the system, and the intricate web of computers and communication systems that tie everything together. Enormous complexity and diversity also characterize the organizations and human systems that operate and manage the power delivery system. That complexity and diversity have become even greater in recent years …” It went on to state, “vulnerability is exacerbated by the fact that the power grid,…originally designed to meet the needs of … vertically integrated utilities, is now being used to move power between regions to support the needs of new competitive markets for power generation. Primarily because of ambiguities introduced as a result of recent restructuring of the industry and cost pressures from consumers and regulators, investment to strengthen and upgrade the grid has lagged…”.

The physical and economic impacts of major storms on the system and the recent revelation of a possible terrorist attack on a California transformer should serve as a wake up call. The current regulatory structure is incredibly complex. As Forbes pointed out, too many agencies at the local, state, and national level have decision making authority over what is approved, denied, and delayed. With so many in charge, no one is in charge. Regulatory oversight and management needs to be rationalized without trampling on states rights or the potential for innovation, and investor rewards.

A national system needs a capital investment system and plan that recognizes that decisions made at the local and state levels can have national implications. A mechanism for coordinating investment decisions is needed, as is a means for deciding what is the responsibility of individual companies and what is the responsibility of the federal government. An effective private-public partnership is needed without shifting private responsibilities to the government.

With the serious threat of terrorism, there also needs to be a single point of authority to respond to attacks that can bring down the system regionally or nationally. There needs to be an efficient organization arrangement for oversight, accountability, and control of the grid in the case of a major attack. Contingency plans need to be developed and tested.

The recommendations of the NAS study represent a good starting point for addressing security, reliability, resiliency, and recovery. An action plan will be expensive but the economic costs of inaction will be greater.


This article appeared on the National Journal weblog at

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