Sparks fly over future of nation's electricity

Congress: As lawmakers iron out an energy bill, factions in the industry clash over how much say government should have in the market.

October 14, 2003|By Julie Hirschfeld Davis | Julie Hirschfeld Davis,SUN NATIONAL STAFF

ATLANTA - When the lights went out in the Midwest and Northeast on Aug. 14, engineers here at the headquarters of the energy giant Southern Co. could tell something was wrong. In a glassed-in operations center in the belly of an office tower, their grid displays showed electricity frequency spiking.

But the blackout touched none of Southern's customers, who, like those in the rest of the South and the Northwest, enjoy some of the nation's cheapest and most reliable electricity.

And people such as Dwight H. Evans, executive vice president of Southern, want to keep it that way.

"We made the right choices in the South," Evans says, sitting in his top-floor office overlooking the Atlanta skyline. "Let the smaller states with the problems solve their own problems."

With Congress on the verge of finalizing a broad energy bill, Southern is at the center of a feud over how to ensure a low-cost, dependable flow of power into homes and businesses.

On one side are Southern and Western states, dominated by a few giant utility companies that want the government to stay out of their markets.

On the other are Midwestern and Northeastern states, where electricity is supplied by a competitive patchwork of companies that want the federal government to help stabilize the nation's electricity system.

Caught in the middle, with potentially the most to gain or lose, are consumers, most of whom thought little about what powered their lamps, refrigerators, air conditioners or factories before Aug. 14. Now, with Americans still wondering when the power might fail again, electricity rules in the new energy bill have taken on new urgency.

A House-Senate committee is set as early as this week to resolve the remaining differences in the measure - including the electricity rules - and prepare it for congressional approval before the bill goes to President Bush for his signature.

Most analysts predict that in the end, the Southern and Western bloc, which enjoys considerable influence on Capitol Hill, will get much of what it wants.

In the South and Northwest, Southern and other companies dominate the markets in their territories, generating power, controlling its transmission and distributing it to customers.

And they guard that dominance jealously, fearing that federal intervention would lump them with higher-cost areas, raising their customers' low rates and possibly making their electricity less reliable.

Things look far different up north. There, no single company controls generators, transmission lines and distribution lines.

In the Mid-Atlantic region, Baltimore Gas and Electric and Pepco belong to a regional group that oversees reliability and the flow of electricity. The group runs a competitive market and makes sure there is enough supply to meet demand.

From an operations center in Valley Forge, Pa., the regional group, known as PJM Interconnection, controls the power and markets it to 25 million customers in seven states and the District of Columbia.

"We've seen the value of coordination, communication and cooperation over a large territory to lowering prices and increasing reliability," says Richard A. Wodyka, senior vice president of not-for-profit PJM.

Lawmakers in the Northeast and Midwest point to PJM, in which membership is voluntary, as a model. They want to force utilities to turn over control of transmission lines to a group - known as a regional transmission organization, or RTO - to manage congestion and run electricity markets for large parts of the country.

It is highly unlikely that Congress will order participation in regional groups. But Northeastern and Midwestern lawmakers and utilities, eager to compete in a larger and more open marketplace, hope the bill will at least encourage an expansion of existing groups and the formation of new ones.

Power companies in the South and Northwest fear that yielding control of their electricity markets could cost them the competitive edge they now enjoy over the rest of the country.

The current system "gives us a distinct advantage, and we ain't giving it up," declared Sen. Trent Lott, a Mississippi Republican who sides with Southern.

Utilities, state officials and lawmakers from the South and West see the blackout as somebody else's problem - the fault of aging transmission lines and a chaotic grid in the Northeast and Midwest where no one company is in charge.

"Moving everything to a central federal plan moves it so far from the customer that nobody's accountable to anybody," Evans says.

A system in which one company produces power, maintains the infrastructure and serves customers is far more reliable, he says. By contrast, he argues, the more complex and competitive arrangement in the Northeast and Midwest is more likely to lead to blackouts.

Advocates of regional groups say just the opposite.

PJM earned praise for its performance during the blackout. Only 7 percent of its transmission area - near Lake Erie and in a small patch of New Jersey - suffered outages during the crisis.

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