A short-circuited market

Electricity: With deregulation and competition, reliability of service returns as an issue.

July 22, 2000

IN THE RUSH to create a deregulated market for electricity, the nation's policy-makers focused on price and competition. They ignored reliability.

Right now, no one thinks twice about whether there will be power when they flip a light switch. But some policy-makers -- particularly the Midwest -- are realizing that deregulation, at least initially, might change that.

Deregulation allows customers to buy electricity from distributors anywhere in the country -- rather than from local power generators. That presents two problems.

First, power cannot be generated and stored like other commodities. Supply has to be constantly adjusted to meet demand. In such a system, consumers can pay dearly for electricity that is produced during sustained periods of high demand.

Second, there are physical limits to transporting electricity. If, as happened last summer, the Midwest has high demand during a heat wave and other states have excess supply, that power must be moved through wires and plants that could become overloaded, possibly causing blackouts.(Maryland's electric supply situation isn't nearly as strained as other regions of the country, largely because of a long-standing power-sharing arrangement with utilities in Pennsylvania and New Jersey.)

Years will be needed to build enough peak-capacity generating plants and upgrade the nation's power grid. In the meantime, there's a realistic alternative: increased conservation.

If we are to avoid regional shortages of electricity on the hottest and coldest days, we must resume the practices of the 1980s when it was demonstrated that energy could be saved with no discernible drop in the quality of life.

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