What Happened to the "Independent Study" of the Effects of Electric Industry Restructuring on Reliability?

Blackout Task Force Recommends an Independent Study
The Joint U.S. Canada Task Force Final Report on the widespread Northeast blackout of August 14, 2003 issued a number of recommendations. Number 12 was to “Commission an independent study of the relationships among restructuring, competition, and reliability.” The blackout occurred mainly in states that had “restructured” their electricity industries. Sixteen states, mostly in the Northeast and Mid Atlantic area, have restructured, while the majority of states have not, and none have restructured since the California crisis of 2000 – 2001 and the demise of restructuring’s major proponent, Enron in 2001.

The report indicated at page 94 that in New York, some of the power plants sold off to new owners during the “restructuring” orchestrated by the New York Public Service Commission had tripped at low disturbance levels, exacerbating the cascading outage:

In particular, it appears that some generators tripped to protect the units from conditions that did not justify their protection, and many others were set to trip in ways that were not coordinated with the region’s under-frequency load-shedding, rendering that UFLS scheme less effective. Both factors compromised successful islanding and precipitated the blackouts in Ontario and New York.

The Task Force Report at page 96 noted its frustration with information provided by the competitive generators:

Unfortunately, 40% of the generators that went off-line during or after the cascade did not provide useful information on the cause of tripping in their response to the NERC investigation data request. While the responses available offer significant and valid information, the investigation team will never be able to fully analyze and explain why so many generators tripped off-line so early in the cascade, contributing to the speed and extent of the blackout.

The Final Blackout report beginning at page 17 cites numerous violations of existing reliability requirements established by NERC, and at page 147 states:

The Task Force believes that the Interim Report accurately identified the primary causes of the blackout. It also believes that had existing reliability requirements been followed, either the disturbance in northern Ohio that evolved on August 14 into a blackout would not have occurred, or it would have been contained within the [First Energy Ohio] control area.

The Task Force did not really inquire as to why so many existing reliability requirements had not been followed by the utilities, but did say that concerns had been raised about a connection between restructuring and reliability that should be investigated:

[I]t is worthwhile for DOE and Natural Resources Canada (in consultation with FERC and the Canadian Council of Energy Ministers) to commission an independent expert study to provide advice on how to achieve and sustain an appropriate balance in this important area. Among other things, this study should take into account factors such as:

  • historical and projected load growth
  • location of new generation in relation to ogeneration and loads
  • Zoning and NIMBY constraints on siting of generation and transmission
  • Lack of new transmission investment and its causes
  • Regional comparisons of impact of wholesale electric competition on reliability performance and on investments in reliability and transmission
  • The financial community’s preferences and their effects on capital investment patterns
  • Federal vs. state jurisdictional concerns
  • Impacts of state caps on retail electric rates
  • Impacts of limited transmission infrastructure on energy costs, transmission congestion, and reliability

Was New York Reliability Compromised by Restructuring?
At page 10 of its Final Report on the Blackout of August 2003, the Joint Task Force discussed the importance of coordinated “black start” capability to restore service after a major bulk power system outage:

To deal with a system emergency that results in a blackout, such as the one that occurred on August 14, 2003, there must be procedures and capabilities to use “black start” generators (capable of restarting with no external power source) and to coordinate operations in order to restore the system as quickly as possible to a normal and reliable condition.

Subsequent documents suggest that New York regulators allowed restructuring and the sale of power plants to occur without assuring solid “black start” capability. A NY PSC Staff Report issued in 2005 states:

Prior to the divestiture of its generating units, Con Edison’s restoration plans designated certain Con Edison generating units for black start duty. When the generating units were divested, however, the contracts for the sale of the generating assets that had previously provided black start capability did not include terms providing for continuation of this service. Although the NYISO, Con Edison, and the generation owners were working to develop such agreements during the period between divestiture and the blackout in 2003, there were no formal agreements for New York City black start services, or rapid restoration services, or for payments to the new owners of the former Con Edison generators for such services. Consequently, the units had not been tested, and the lack of testing of the units appears to have directly contributed to the poor performance of most of the New York City black start generators* * * * Recent attempts to test the designated black start units in New York City, however, have shown that some major generators designated in the black start plan are still not yet available to operate should another blackout occur.”

If this report is correct, more than two years after the August 2003 blackout, “black start” responsibilities and capability in New York’s restructured electric industry still had not been fully resolved. Also, papers submitted by Orange & Rockland Utilities indicate that the new owners of a generating plant that O&R divested in the course of New York’s restructuring failed to provide “black start” power when it was requested during the August 2003 blackout:

Furthermore, although Mirant’s units were included in O&R’s local restoration plan through September 26, 2005, when O&R called on Mirant to supply Black Start services during the blackout of August 2003, Mirant failed to provide such services, in effect, failing a live test of its Black Start capability.

Thus, it seems that restructuring did affect black start capability in New York.

In addition, questions have been raised whether the advent of restructuring and market structures for compensating transmission owners have altered incentives to repair major transmission line outages promptly. For example, the NYISO investigated whether Con Edison had financial incentives to slow repairs and keep a line out of service, and found no wrongdoing in 2002. The same line, from Westchester to Queens, was out of service in the summer of 2006, causing the NYISO and FERC to express concerns to Congress that New York was in danger of blackouts and load shedding in the event of extreme weather or additional outages. The congressional testimony indicated that Con Edison had projected repair of the outages in August. The lines were restored to service in July.

DOE Holds Conferences
The U.S. Department of Energy (DOE) and Natural Resources Canada responded to the Task Force Recommendation, but not by commissioning experts such as the National Academy of Sciences, or a university, or other consultants to conduct an independent research study.

Rather, two conferences were held for the purpose of hearing speaker panel presentations on volunteered white papers, which had widely differing conclusions. PULP has excerpted the papers, some of which identify links between electric industry restructuring and reduced reliability, such as this comment submitted by engineers experienced in prior blackout investigations:

Deregulation and the concomitant restructuring of the electric power industry in the U.S. have had a devastating effect on the reliability of North American power systems, and constitute the ultimate root cause of the August 14, 2003 blackout.

Their comments on the flawed investigation of the root causes of the blackout seem appropriate:

The government’s blackout investigation is another example of the failure to allow technically competent advisors to contribute. The government carefully selected personnel and orchestrated the investigation’s limited content . . . . The government controlled the writing of the report, the public hearings, and workshops conducted after the blackout. Technically competent participants were given bare minimum opportunities to comment. The government even required those involved in the investigation to sign confidentiality agreements, an action unprecedented in the history of electric power in the U.S.

Other papers expressed confidence that enforcement of existing reliability rules and making them mandatory rather than voluntary would suffice. The conferences were held in September, 2005. In July 2006, DOE quietly issued a report (with no accompanying press release) titled The Relationship Between Competitive Power Markets and Grid Reliability . No conclusions about the conflicting views on the relationships among restructuring, competition, and reliability expressed in the papers are drawn. It simply assembles and summarizes the conference white papers and public comments, without findings and recommendations. On October 3, 2006, DOE and Natural Resources Canada issued a final report on implementation of the Blackout Task Force recommendation for an independent study, saying that the “independent study” recommendation has now been fully implemented

Nothing more is to be done.

In sum, the possibility of a rigorous independent study to implement Recommendation 12 of the Joint U.S.-Canada Task Force has ended with a report that makes no findings or recommendations. Neither the U.S. – Canada Task Force, nor any state or federal utility regulator, nor any independent researchers conducted a thorough examination to determine whether restructuring contributed to the blackout of 2003 or its long duration, and whether reliability of the electric power system is now compromised in states that restructured. For more information, see PULP’s web page on competition and reliability.

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