Deregulation and Niagara Mohawk - Is There a Story?

It's just a few hours after the Northeast U.S. power outage, and facts are trickling in; as of right now, it looks like an accidental overload knocked out a large part of the Niagara Mohawk power grid. A few years ago, California went through rolling blackouts that were largely due to a poorly-executed deregulation of that state's power industry. The question that's probably occurring to many of us is, did late-'90s deregulation play a role in today's power event? I don't know the answer, so I'm turning it over to you -- moderators, please check links and up-mod the most informative, pro or con. Here is some information to get you started: "We support deregulation 100 percent..." (N-M spokesman, 1997; notes N-M wanted to sell generators and "concentrate on the transmission and distribution of energy" -- did it?); N-M made some bad investments and is scheduled to request a rate hike (did it?); and N-M's own website says: "Deregulation [has] changed the laws and regulations governing the electricity industry to promote competition..." (how so?).

Comments

Nothing to do with deregulation

[mjmalone]

I don't see how this has to do with deregulation. It has more to do with poor design of the power infrastructure. From what I have heard, the way the power grid works is there are switching stations which link various networks together much like a router on a lan. When one switching station goes down, for whatever reason, there are fail safe systems which move affected areas over to other switches.

What can happen is, if all stations are working at or near capacity and a part of the network goes down for whatever reason (fire, or too much power being drawn for example) then when power is routed from the other switching stations they become overburdened as well and there is a ripple effect of outages across the grid.

When this occurs, power companies have to be careful when bringing power back online as they may become overburdened again as soon as they become operational. The U.S. power grid has become extremely complicated and vulnerable as it has scaled. Fail safe systems often fail in their fail safe components.

Regarding the rolling blackouts in California, they had more to do with Enron witholding power than with deregulation. I have not researched deregulation sufficiently so I can't really argue for or against it, but blaming everything on it is not helpful.

Re:Nothing to do with deregulation

[Wesley Everest]

I don't know if the overload was due to deregulation, but one of the purposes of regulation is to ensure that the power company can satisfy demand, even relatively unlikely peak demand. It's possible that deregulation led to them running leaner with less margin of error for a big spike in demand.

Add to that an unexpected increase in air-conditioner usage and there you go -- overload and outages. That's one possibility. I suppose we'll find out the facts soon enough, though.

Re:Nothing to do with deregulation

[straybullets]

It has more to do with poor design of the power infrastructure

well, bad design is linked to deregulation, since good design takes time, and deregulation wants money fast. It goes the same for taking good care of the existing installation : it costs money, and deregulation is about profit more than service.

the true fact is that deregulation is a joke, it was well seen with the english rail system. And the joke is on us !

Re:Nothing to do with deregulation

[PFAK]

I'm going to have to disagree with you.

Deregulation usually ends up having the power company as a corporation, and not a Crow Corporation or such. When a power company (or any other company for that matter), has to become profitable they will cut costs, and when they are cutting costs the level of service usually falls.

The most likely reason that this has happened is that the power companies did not want to spend as much money on the grids to maintain them, and make sure that they were in complete working order, and add more grids and upgrade their equipment -- all because of deregulation, and saving money on in the "short term".

Re:Nothing to do with deregulation

[straybullets]

The same for the british rail : it worked perfectly. deregulation came in and it went down in flames, late trains, dirty wagons, and dead peoples in accidents : you need to take care of the infrastructure, you need to plan for the future, and keep the whole engine running smooth.

You can't do that if you have to keep an eye on your competitors and keep lowering the prices some more, and fire those expansive workers.

forget what you've been told : open your eyes and think.

Re:Nothing to do with deregulation

[macdaddy357]

The only risk publicly traded corporations worry about is not making projections for this quarter. If short term buck grabbing causes a long term problem, it will probably be someone else's problem. Besides, the boys in the boardroom can always blame the lowest level drones, and assure shareholders they will be dealt with.

Re:Nothing to do with deregulation

[rsborg]

That doesn't make too much sense to me. Assuming the blackout is a result of cost cutting, it seems like an unreasonable risk, because now that the power's out, people CAN'T use the power, and thus the utilities can't bill until they lights come back on.

That would make sense, if you don't compare what they saved (in running lean) vs. what they lose (in one blackout). In short, I bet "unreasonable risk" you pose, would be, financially reasonable if it only happened occasionally, and that's probably what they calculated. The same concept as "acceptable level of casualties"... and although not as amoral, still causes hell for everyone not making that extra buck that the power utility is.

Re:Nothing to do with deregulation

[Chris Burke]

Deregulation would only help this sort of crisis, because it would be in the individual stake-holder's best interest to shield themselves from such an event.

Well, that's one possible outcome, but I wouldn't say only. It is also in the stake-holder's best interest to cut as many corners as possible, reducing costs and maximizing profits so they can cash in and get out before the inevitable disaster hits.

Re:Nothing to do with deregulation

[Zeinfeld]

The same for the british rail : it worked perfectly. deregulation came in and it went down in flames, late trains, dirty wagons, and dead peoples in accidents :

British Rail did not work 'perfectly' by any standard - with the possible exception of the privatized service.

The problem is not regulation, deregulation, privatization, nationalization or any of the surface reasons thrown about. The real problem is people who substitute ideology for thinking about a problem.

The free market is not the solution to every problem. Get over it.

The state is not the solution to every problem either. Get over it.

There are occasions when you have to use one strategy and occasions when you have to use another. Understanding that there are potential problems with a proposed change is essential if you are going to avoid them.

Instead what we get is politicians who use ideology as a substitute for thought. The solution to every domestic energy issue must be to drill oil wells in Alaska. The problem to every foreign policy problem must be to invade a country in the gulf with large oil reserves. The problem to every economic problem must be to give stupendous tax cuts where at least 80% but hopefully as much as is possible goes to the richest of the rich, and in particular rich Texas oil-men. One thing is certain, W. is not going to say a word about the NYC power cut until he can work out how it can be used to justify some policy to benefit Texas oil men.

The free market is one thing, if you could establish a free market in energy that would be a great solution. The problem is that it is not possible to do that, the market is illiquid, supply and demand are constrained in certain ways. But to the ideologue these problems simply cannot exist, they don't exist in the theory so they cannot exist. Its like a robot in a bad 1960s Sci-Fi serial. So the ideologue plows ahead with a broken scheme and creates an unmitigated mess.

That is exactly what happened with privatization of BR. There is no reason the UK rail network cannot be private, it was built entirely with private capital. But the Tory privatization plan based on the politics of sticking your head in the sand was never going to improve matters.

Re:Nothing to do with deregulation

[stanwirth]

I agree with you, macdaddy. The power failures in Auckland NZ in 1998 were caused by deregulation. Lasted over a week. The cause was failure to properly maintain underground mains -- lines maintenance had been farmed out to a variety of cut-rate contractors who just didn't do a bloody thing. They had to call back in the old AEPB (Auckland Electrical Power Board) engineers who'd been made redundant in the deregulation craze of the mid-90's. Brought back in as contractors at top dollar, might I add.

The solution was to separate the lines companies from the generators and retailers -- i.e. re-regulation was introduced

This hasn't fixed things, really, because the lines companies now have no incentive to invest in maintenance, and the maintenance the do do (when there's a blackout -- we get 'em all the time where I am) is way piss-poor and the contractors do it in such a way as to maximise their own revenue.

For example, a few weeks ago, the power went out in a big rain/windstorm like it always does. So, Alstom (the same contracting outfit that maintains the public telephones for NZ telecom, which is the latest spectacular privatised public services failure story here) comes out to solve the immediate problem, which is the fact that some wet bamboo had blown over the three main lines servicing the whole valley, shorting us out. So they remove the one piece of bamboo causing the short. I watched them. This bit of bamboo had come off a whole stand of bamboo right next to the main lines, and there were over a DOZEN other bits of bamboo in the stand that had obviously also been blown over the same three lines -- burnt off at the same spot. I asked the Alstom guys if they could request that the stand of bamboo could be reported as the cause of repeated problems -- Answer? oh, no, that has to come from "head office."

Now, there was another contractor (different company) halfway up the road cutting down some foliage on behalf of the lines company -- foliage which had nothing to do with the problem . Funny, that. So I went and asked the tree cutter guy, there with all his gear and ladders, if he could please either cut down the stand of bamboo that was the real source of the problem, or notify "head office" (the lines company) that there was just a tad more foliage trimming that would need to be done to solve the source of the problem . No, he couldn't do that. He'd been sent out to cut down some tree branches, and by god that's what he was going to do.

Now why should either of these contracting companies do anything to solve the cause of the problem? After all, leaving the source of the problem in place assured them of ongoing work -- at top dollar . While this ate into any budget the lines company might have for other maintenance (like maybe uh, moving the 40-year-old overhead lines to a safer and more modern underground system so we don't get the spectacular exploding-transformer effect every time there's a lighting storm maybe? DUH!)

Privatisation is the cause of our blackouts, that's for sure! And it's caused the rates to go up. Worse service, higher cost, poorer maintenance.

And what's the deal? They privatised and deregulated the airline, the electric companies and the phone company -- but in each case, as a sop to the poor NZ citizen, who may have been losing an asset but was certainly getting poorer and more expensive service, they earmarked blocks of stock that could only be issued to New Zealanders.

So that some New Zealanders could have the privilege of purchasing an asset FROM THEMSELVES. They only fell for it because of this farking myth about competition leading to better service and lower cost. Yeh right.

Re:Nothing to do with deregulation

[dspeyer]

Or not get out.

Seriously, I don't think the power companies have been significantly harmed here. They won't lose customers, seeing as the outage was purely geographic. All bad will is directed against the power companies equally.

Let's face it: the only thing power companies compete on under deregulation is price. They have the same product, the same reliability, etc. This means the only viable business model is to cut every corner you can.

But money is the one true god, and questioning deregulation is unamerican, so we don't see a problem here, right?

Re:Nothing to do with deregulation

[stanwirth]

And involving the government would have solved any of this how?

First of all, rather than having two different contractors, both with a profit motive for not solving the problem, you would have had basically lazy government employees that would have had it in their best interest to solve the source of the problem -- so they wouldn't get future callouts on cold rainy days. Who the heck wants to go out on a rainy day for n+1 emergency calls-- when they could schedule preventive maintenance requiring them to go outdoors during the months when it doesn't rain nearly as much.

When the government was directly involved (i.e. owned the power companies, and the telephone companies, and the national airline), there was *one* bureaucracy -- that was still ultimately accountable to the public. And the quality of service was very high.

Now there are half a dozen "state owned enterprises" (SOEs) which means the public still foots the bill, but now (being "privatised") we have absolutely no oversight, and they are accountable to their boards to make a profit, rather than directly to the people to provide a service. In the case of the lines companies and phone companies, the quality of service is directly related to the integrity of the lines themselves -- and without public feedback, there is no incentive to improve service, because the lines companies still have a monopoly. No such thing as competition there. Yet the SOEs were set up on the pretext of "providing competition" where no competition can possibly take place. It's an argument that would only appeal to a neocon ideologue.

Furthermore, because it's ex-government department employees in these SOEs that operate the SOEs but now without public oversight -- well, it's the same fat, lazy, corrupt, theiving do-nothing slobs you get in government departments, but now they can do nothing for more money and nobody but other fat, lazy, corrupt, theiving slobs --other ex-government bureaucrats--are looking over their shoulders. The public has no right to even find out what's going on---because now it is a private company.

They're more organisationally inefficient and cut more corners on service and funnel more plum contracts to their buddies now than they did when it was a government monopoly/bureaucracy-- because at least when it was a government monopoly/bureaucracy, we had some right to oversight. New Zealand has seen how the privatisation of public services gives you the worst of both the private and public sectors.

Unfortunately.

(You've got a red-tape bound beuacuracy. Governments are famous for them.)

And when the NZ government-run electricity, telephone and airlines were privatised into SOEs, the tape only got longer, redder and meaner--and more expensive.

Re:Nothing to do with deregulation

[jmorris42]

> The excuse for the 1965 power outage was effectively "we didn't know."
> Obviously they know now, so "tbey didn't care" is a plausible theory.

A temporary failure of a complex system like the American power grid every few decades doesn't sound like a "I don't care" attitude to me. Sounds like imperfect systems built by imperfect humans. The engineers will study this incident and improve the system. And we will discover yet another failure mode after another couple of decades of rapid demand growth. NIMBY attitudes towards building power plants are most likely the largest contributing factor though, since had the industry been able to build new plants to keep up with demand the system wouldn't have been running so close to capacity and that isn't a problem for engineers.

Of course as a Dean supporter, brains and rational thought isn't likely to be your strong suit. Raw emotion, mostly a blind hatred of Shrub, are his draws.

Re:Nothing to do with deregulation

[arivanov]

It is a result of american dislike of mathematics and long term scientific projects.

You cannot replace mathematics with elementary computer control systems based on simple feedback. That is the reality. And the american power blackouts are one of the common illustrations given in mathematical modeling classes in most of Europe of why simple feedback systems fail.

After the big blackout of the sixties every single European country has put this task to their universities and/or specilized institutes. In all cases it was given to mathematicians, not engineers (or ended up with the mathematicians after the engineers failed).

I happen know some the people who did the modelling in three countries. It took anything between 7 and 11 years to come up with viable models as well as analysis of viable failure scenarios. The scenarious have been rolled out by the 80-90-es so we are talking 20+ development and deployment cycle.

As a result you simply cannot take out the grid like this in any European country unless the country has grown complacent and has stopped updating the models to account for change in power usage patterns.

DAMN!

[DAldredge]

The people that RUN THE FSCKING GRID do not know what went wrong and /. is posting articles asking if X caused it???

Are you insane?

Re:DAMN!

[HiThere]

Be aware that there can be multiple layers of "causes". At one level the cause may be "the insulation on some wires failed and a short developed across the coils of a transformer".

OK. But why?

OK. But after the last New York blackout, there were many promisses that new switches were going to be emplaced that would automatically shutdown connections to large areas that were failing. This doesn't seem to have happened. Did the switches fail, or were they never installed.

OK. But I heard that there was this computer model of the entire electrical system that was being built, which would be able to examine it's sensors an from a log of failures would be able to instantly report on what the cause had been, and where it had occured. Did the model fail? Is there some reason it isn't being used?

Ok. But...

Some of these could be answered immediately (by those with knowledge), some require on site investigation. Some are obvious without any statement, e.g., clearly the super power grid model isn't being used, or they could immediately pinpoint the problem. But why? (Probably it takes a super-computer to run it, and they can't afford to have it running most of the time...if it actually works, that is.)

Re:Do I hear a chorus of 'Blame Canada'???

[Anonymous Coward]

I was waiting for it too - as soon as it came on that a Canadian part of the grid was down, I was thinking, "They'll be blaming Canada any minute now." Sure enough, right on cue, it starts flying back and forth from CNN to MSNBC to FOX - Canada Canada Canada Foreigners it's all the damn furriners.

Turned out not to be true, but honest to god the USA needs to get a grip. Not everything bad that happens is the fault of other nations. It's getting impossible to even talk to Americans these days - the concept of the USA being less than heavenly perfection personified, coming down from above to light the way for backwards and brown peoples who should shut up and do as they are told is rampant - you can see the rage rising behind their eyes when you even suggest that the USA is not to be envied in all things.

The USA is becoming strange and unpleasant. If it were a high school student it would be a wealthy jock, well-dressed, undeniably smart and handsome but with an ugly, arrogant soul. "They only hate me because they're jealous."

I know America - I like America. All the same America as a whole needs to rediscover a bit of humility.

Cause: Overloaded grid and bad logic

[Jimithing DMB]

The original post was very informative. EmagGeek was right on track when he mentioned that one generator got knocked offline for some reason and because of that the power grid compensated by rerouting electricity from other generators.

My dad was vice president of electric supply for NIPSCO for a number of years after having worked his way up the chain of command starting off working at a power plant as an electrical engineer. As VP of electric supply his job included ensuring NIPSCO was generating enough power to cover the needs of all the power customers (including several steel mills), working with regulators to ensure the rates were reasonable so that money could be spent to increase capacity when needed, and working with environmentalists to ensure that emissions were well below accepted government levels.

NIPSCO was a company very interested in serving its customers. As a heavily regulated utility the only reasonable business decision is to service your customers the best that you possibly can. My dad took that to heart. He was strongly opposed to deregulation. Why? Because the simple fact of the matter is that my dad was somewhat of an exception. Most executives tend to look strictly at the bottom line and lose sight of the forest for all the trees. He knew that deregulation would inevitibly lead to cost cutting in areas where costs should not be cut simply because without regulation the power company is at the mercy of its shareholders and shareholders are very often in it strictly for the money.

So, tonight I had a discussion with him about this mess. First of all, the background. Apparently a generator went off grid this afternoon forcing other generators to take up the slack. That can happen for a number of reasons. Equipment does fail, humans do make mistakes, etc. What's supposed to happen is that the rest of the generators and the grid should have enough capacity to take up the slack. Should there not be enough capacity then someone needs to lose power. This should happen at the customer side. That is, a portion of the customers should be blacked out to reduce the load on the grid and allow normal operations to continue. I believe that is what you meant by "putting a release on the chain." You are correct, that's what should have happened. The fact that it didn't indicates that there was some major problem with the logic of the grid. It would have been far better to cut the power to thousands of customers than millions.

Bad logic was part of the cause. The other problem was a seriously overloaded power grid. The power grid was designed to handle the situation where a power company normally had sufficient capacity but due to generator failures was unable to meet demand. Notice that I said failures (plural). If a few generators are knocked off the grid the company ought to have enough energy to supply all of its customers. Furthermore, it ought to have backup generators that can be started and on the grid within an hour. Those backup generators are just that: backups. They cost a hell of a lot of money to operate but they aren't as expensive to build as a main generator. If a few more generators get knocked off grid it's reasonable to expect that a power company will be unable to handle this situation without buying power from another company. That is what the grid is for.

Unfortunately, because of government stupidity (deregulation) and corporate greed the grid is now being used in a way it was never intended to be. It is often loaded to near full capacity drawing power over very long distances. The idea of deregulation was that loosely regulated for-profit companies would compete to generate electricity which the local power companies could purchase instead of generating their own. Because the power companies no longer had to be responsible for providing capacity in excess of what is needed the rates could be

Re:Moment of silence

[rsax]

I know that your comment was meant to be humourous but on a more serious note, perhaps this event could serve as a wake up call to all the people who needlessly consume more than they have to (Yeah right, I can hope can't I?). I know so many geeks who run non-critical computers 24/7 which are chugging along just for the fact that they want to see those high uptime numbers. We all know *BSD/Linux is stable. You don't need to suck up power (pollute more by making fossil fuel power plants work extra hard) to prove something that's already obvious.

De-regulation and Competition

[sterno]

De-regulation works well when there is a competitive marketplace and it fails utterly when there isn't. Witness the airlines for examples of both how it succeeds and fails. If you are travelling between major hubs in the US, you have multiple airlines to choose from and the price you pay is pretty low. If you are travelling between off-hub points, then you pay a premium because it's likely only one or two airlines serve that route.

The electrical industry, much like the phone and cable industry is too dependent on the connection to the house to be truly competitive. Ultimately whoever controls the wires into the home runs the show and has a competitive (and frequently regulatory) advantage over anybody who would need to run new wires.

There seems to be this belief that privatizing and de-regulating are magical cure alls for many problems. They aren't. If a market is naturally prone to creating uncompetitive monpolies, then neither government nor private industry will make it more efficient over the long run. Thus you are better off with government where at least the motivations are to please the citizenry rather than please the shareholders.