Two weeks ago, approximately 100 generators connected to the U.S. electric power transmission system cut themselves off in response to a sudden imbalance in power flows. They are designed to do this to prevent mechanical damage to the generators, which would have taken weeks or months to repair. This also prevents blackouts from spreading.
Policymakers are looking for ways to prevent future blackouts, but Cato Institute experts say they shouldn’t draw the incorrect conclusion that the blackout was due to “market failure.” Rather, it is due to the failure of the regulatory structure.
California, for example, experienced blackouts in 2000-2001 after changing its regulatory structure. But in California there was no deregulation of the transmission system. Generation and retail sales regulations were loosened somewhat, but regulation of the transmission grid increased.
New investment in the transmission grid may be needed, but the way to encourage it is not heavier federal control.
For example, direct current transmission lines are not subject to regulatory price controls and don’t affect users of the alternating current transmission system. One such line between Connecticut and Long Island was used for the first time on the Friday before last to help bring power to Long Island.
Source: Jerry Taylor And Peter Van Doren (Cato Institute), Outside the Grid, Wall Street Journal, August 18, 2003.
For text http://online.wsj.com/article/0,,SB10611720588151200,00.html
For more on Electric Power http://eteam.ncpa.org/policy/Energy/Electrical_Power/
FMF Policy Bulletins/ 26 August 2003
