Behind the breakdown

WJones & MGandall wj_mg at
Sun Aug 17 18:27:56 MDT 2003

Most analysis of last week's spectacular power outage in the Northeast US
and Ontario has concentrated on the technical factors, but two opinion
pieces in the New York Times this weekend – one by Daniel Yergin and Larry
Makovich, the other by Robert Kuttner – relate the breakdown to deregulation
of the energy industry. We've reproduced the articles on

Yergin and Makovich describe how deregulation has been driven by large
industrial concerns seeking cheaper power from the less industrialized
hinterlands with excess supply.  With the energy sector opened to
competition, manufacturers and retail distributors are no longer obliged to
buy power from regulated monopolies in their home market and are free to
roam across the continent in search of a better deal. The problem, however,
is that the transmission system has not kept pace with the regulatory
changes, and bottlenecks have developed which have gravely impaired the
system’s reliability.

Yergin and Makovich, who support deregulation, blame the failure to update
the grid, among other things, on obstructionist energy-producing states who
don’t want to share their cheaper regulated power. Kuttner, a critic of
private power, suggests the failure to modernize the transmission system is
inherent in deregulation, mainly because private operators refuse to invest
in unprofitable lines which increase capacity, and reduce prices and

Neither article speculates on the likely public reaction.  Public skepticism
about the deregulated system -- already high because of the Enron
price-gouging scandal in California and the experience of higher rather than
promised lower rates -- may be reinforced by the latest incident. But
supporters of deregulation will attempt, as Yergin and Makovich have done,
to blame the system's unreliability and failure to deliver on its promises
on the fact that deregulation has stalled and the system is a hybrid one
combining the worst features of public and private power.

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