News Release

August 15, 2003

Media Contact: (202) 789-5200

The Big Blackout

WASHINGTON -- In the aftermath of Thursday's record-setting blackout in the Northeast, Cato Director of Natural Resource Studies Jerry Taylor and Regulation Editor Peter VanDoren explain some of the public policy issues behind the power outage:

"Here's what happened: A local failure quickly migrated throughout the eastern power grid. That should not have happened -- power plants and transmission links can and do go off-line more frequently than the public realizes, but the loss of capacity created by those events almost always leads either to the use of reserves or isolated blackouts rather than region-wide failure. Accordingly, it's likely that the computerized maintenance regimes in place to quarantine power failures failed somehow to keep a localized problem relatively local.

"If so, the finger-pointing now underway in Washington is almost entirely disconnected from reality.

"Many are claiming that too little investment in the grid is to blame. While more transmission interconnections allow greater backup possibilities when specific generators or transmission links fail, more interconnections also increase the possibility of a failure anywhere in the eastern interconnection spreading throughout the system.

"Deregulation has been fingered as a culprit, but the transmission and distribution system has NOT been deregulated -- in fact, regulation of this sector has INCREASED throughout the 1990s. What deregulation occurred in the 1990s occurred exclusively in the generation and retail sales sector of the business, not in the transmission and distribution end of the business.

"Assertions that the blackouts underscore the need for a national energy strategy fail to recognize that the energy bill now in a congressional conference committee would do little to increase the incentives for private companies to invest in expanded transmission capacity and that such investments increase the difficulties in preventing failure propagation throughout the system."

In 1998, VanDoren examined electricity regulation in "The Deregulation of the Electricity Industry: A Primer". He also made several electricity policy recommendations for the current Congress in the Cato Handbook for Congress.

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