Pain goes beyond the gas pump
Copyright 2000, MSNBC
June 30, 2000
MSNBC.com’s Miguel Llanos as well as The Associated Press and Reuters
contributed to this report.
June 30 — As holiday travelers face sticker shock at gas pumps, the world’s most prosperous nation faces a humbling fact: It is no longer able to provide cheap, stable energy. Beyond the high price of gasoline, the United States faces a near future of power blackouts and higher heating costs come fall.
T’S NOT the kind of crisis like the 1970s oil crunch, when OPEC drove prices up. Instead, it’s a more gradual, and perhaps longer-lasting, phenomenon. OPEC supply is still a factor, but other variables have emerged since the ’70s, chief among them competition among power companies and the high-tech economy’s thirst for ever more juice.
At the heart of the problem, and possibly the solution, is deregulation of utilities — an industry worth $220 billion a year.
The industry had been a regulated monopoly for 70 years, almost as long as electricity has been available. But in the last decade or so, there’s been a move to let companies compete for customers.
Maryland, for one, is deregulating its industry starting Saturday. But, in a sign of the hectic times for the nation’s power system, none of the 12 authorized companies is ready to compete, and plan to roll out new pricing plans later this year.
Sources: Energy.com, Energy Department
THE POLITICS
With summer starting, and presidential elections in November, the energy crunch has also become a campaign issue.
Vice President Al Gore this week unveiled a plan of tax credits to promote renewable energy, hybrid gas-electric cars and energy conservation.
Texas Gov. George W. Bush, a former oilman, countered that instead of tax breaks he’d focus on stronger diplomacy with OPEC and fewer government obstacles to drilling for crude.
“Suddenly energy policy has become an issue,” said William Amurgis, content director at Energy.com, a site that caters to energy consumers. The reasons, he says, are high gasoline prices, probable blackouts this summer and pressure on natural gas prices.
The pressure on natural gas will translate into higher heating costs just ahead of the presidential election, he says, “and consumers are going to feel it then.”
THE PROBLEM
A recent Energy Department report concluded that more competition in the industry has strained transmission and distribution lines. That’s because some utilities have focused more on cutting costs and maximizing prices than on assuring that power is kept flowing, the report found.
Energy Secretary Bill Richardson echoed that sentiment this week and warned that power outages this summer are likely, especially in the West and Northeast. “We’re concerned about the reliability of the electricity grid,” Richardson told a House Commerce Committee hearing Wednesday.
California is of particular concern, with officials there urging consumers this week to reduce power use or possibly face new rolling blackouts. Earlier this month, power problems and high demand caused an outage in the San Francisco area.
Ironically, the Bay Area’s source of wealth — Silicon Valley — is demanding ever more power, exacerbating the problem.
Richardson said both the Pacific Northwest and California “remain very vulnerable to power outages” during peak demand periods. He said the regions were “barely able to avoid” brownouts this past week.
The North American Electric Reliability Council, an industry-sponsored group, recently forecast possible power problems this summer in the Northeast, the Southwest and California.
Nationwide, the council said that summer peak demand for electricity is expected to be 1.7 percent higher this year than last summer. It said that additional generating capacity has been created in Illinois, Texas and the Southeast, where power interruptions were a problem last year.
POSSIBLE SOLUTIONS
Congress is considering legislation that would create an agency to monitor and regulate reliability of the nation’s electricity grids. But even if that bill passes, it won’t have any impact this summer.
President Bill Clinton on Wednesday argued that the legislation is not enough. Instead, he said, Congress should pass a comprehensive electricity deregulation bill that would set clear federal guidelines.
Richardson said such guidelines would help organize what’s so far been a state-by-state deregulation of retail markets. Moreover, he said, wholesale power suppliers are uncertain of who’s in charge at the federal level, making it hard for competitors to share space on the national power grid.
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So what’s a consumer to do? While deregulation has created supply problems, it has also created some opportunities as states start to let residents shop for electricity. Some even offer a “green” path that reduces the stress on traditional sources.
Connecticut is the latest to allow competition, with 11 suppliers vying for customers as of Saturday.
Windmills producing electricity rise above a farm near Alta, Iowa. The $200 million project uses 257 windmills to provide 1 billion kilowatt hours of electricity a year.
Along with that competition has come Web sites like Energy.com and Energyguide.com, which offer consumers help in figuring out which plan makes the most sense for them.
The Internet has also allowed “green” power companies to spread their gospel. The pioneer in this field is GreenMountain.com, which began in 1998 by supplying wind and solar power in California and now also operates in Pennsylvania and New Jersey.
The company says it has 100,000 customers and plans to expand nationwide as deregulation spreads.
A key drawback, however, is price. Electricity from wind, solar and other renewable energies still cost more than electricity from power plants fired by coal or natural gas.
And just as deregulation has cut both ways when it comes to prices and grid stability, it has proved to have both benefits and drawbacks for green power.
A new report by a market research group highlighted that fact. “Although deregulation and competition have fostered the introduction of renewable energy technologies,” Frost & Sullivan analyst Heidi Anderson said in releasing the study, “the demand for low-cost electricity puts the higher cost of renewable energy at a disadvantage.”