A Problem Bush and Congress Should Work On - But ...

WASHINGTON - There is growing frustration among many power-industry officials and watchdogs that, one year after the country's biggest blackout, electric reliability rules are still voluntary. They worry that as the memory of that day fades, the momentum to improve the grid will, too.

Routine surveillance of the industry has been ratcheted-up in recent months, with government and industry engineers publishing their findings online. However, outside experts and even those involved in the so-called audits expect only a short-term benefit from a compliance strategy that relies on peer pressure rather than financial penalties.

"No utility is going to want a report coming out that they are not complying with the standards," said Hoff Stauffer, a transmission expert at Cambridge Energy Research Associates, a consultancy based in Cambridge, Mass. "But I don't think we should rely on this informal pressure, because over time it will dissipate."

For now, the attention paid to transmission reliability is unusually high as companies invest money and time to update monitoring technology and practices, executives said.

"If anything has dramatically changed in the past year, it's that - awareness," said Michael Kormos, vice president of operations at Interconnection of Norristown, Pa., a grid operator for several states. "Everybody's asking that reliability question first."

Reliability rules govern everything from tree-trimming around power lines to the protocols by which grid operators dispatch power, and experts said their importance cannot be underestimated.

In fact, a team of investigators from the United States and Canada concluded that the widespread outage on Aug. 14, 2003, which left tens of millions of people in the dark, could have been prevented had the existing rules been followed. Moreover, the North American Electric Reliability Council, or NERC, the industry-sponsored group that created the rules, said in a report published last month that "voluntary compliance with reliability rules is no longer adequate."

Yet proposed legislation that would give enforcement authority to federal regulators or the reliability council, or both, has been locked to the hip of a broader energy bill.

"It's a hostage," said Elizabeth Moler, a former chair of the Federal Energy Regulatory Commission and now an executive vice president at Exelon Corp., one of the nation's largest electric power companies.

The energy bill has been stalled for years due to partisan battles over issues such as drilling for oil in an Alaskan wildlife refuge and regulation of carbon-dioxide emissions. And while Democrats in the House and Senate have attempted to separate the reliability issue from the massive energy bill, Republicans have refused to go along.

"Reliability is not and should not be a partisan issue. It's unfortunate that it's taking on that character," said Linda Stuntz, an assistant energy secretary during the first Bush administration and a current member of the National Commission on Energy Policy. She said it would be "irresponsible" for the year to end without compulsory reliability standards.

FERC chairman Pat Wood said the lack of mandatory standards one year after the blackout is "puzzling" and acknowledged that commonsense appears to have taken a back seat to politics in an election year.

Wood said he hasn't given up hope on passage of an energy bill that includes mandatory grid-reliability rules. But just in case that doesn't happen, Wood said he is preparing other ways to hold the industry's feet to the fire.

One strategy, he said, could involve disgorging profits from companies that are found to be in violation of the voluntary rules.

"We have never had specific authority over reliability, but we'd be willing to take a shot in court," he said.

Another approach, Wood said, would be to rewrite the regulations by which utilities charge consumers for the cost of power transmission to include minimum service levels. "And if you don't live by it, you'll be penalized," he said.

At the moment, officials are left banking on peer pressure to persuade power companies to abide by the voluntary rules.

Engineers from FERC and NERC plan to inspect every power provider in the country within three years, and they've already begun posting their findings online.

Among other things, the engineers are assessing grid operators' readiness to prevent a local outage from spreading - as happened during last summer's blackout, which began in Ohio and quickly cascaded across seven more states and parts of Canada.

The auditors are also coming up with a list of best practices and encouraging companies to implement them.

For example, in its assessment of Florida Power & Light, the team lauded the utility for "preparing for abnormal operating conditions."

Alternatively, We Energies of Wisconsin was chided for poor coordination with the Midwest Independent System Operator, particularly in the areas of communication and in clearly defining responsibilities.

All in all, the industry appears to be on its best behavior, executives, regulators and analysts said. Yet they worry that with each passing day, some in corporate America are less likely to do the right thing as the profit motive inevitably collides with the greater public good.

"Unless there is some sort of mandatory standard, there is always the possibility that folks will get comfortable again," said Janine L. Migden-Ostrander, head of the Office of the Ohio Consumers' Counsel, which advocates for utility customers in the state.

"What can happen is that, if things are operating well for a while, people stop focusing," she added. "And when people get lax that's when bad things can happen."