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Why Did the Transmission Lines We Weren't Allowed to Build Fail to Carry the Current?
by David M. Brown

It is always a great mystery to those who regulate our lives why, when you prevent people from doing things, the things you prevented them from doing don't get done.

How did the disaster start? Was it a terrorist act?

Terrorism was ruled out pretty quickly, even before government officials knew the proximate causes of the blackout that shrouded eight states in the mid-West and Northeast, as well as a swatch of Canada. Now it seems that al Qaeda, those wonderful people, have taken credit for the disaster. According to London-based Arabic newspaper Al-Hayat, a communiqué "attributed to Al Qaeda claimed responsibility for the power blackout...saying that the brigades of Abu Fahes Al Masri had hit two main power plants supplying the East of the U.S., as well as major industrial cities in the U.S. and Canada, 'its ally in the war against Islam (New York and Toronto) and their neighbors.' " The al Qaeda operatives claim they can't reveal how they caused the blackout, lest they jeopardize plans for similar operations. Uh huh. Since the propaganda value for them of being able to show that they did in fact cause the blackout would be enormous, it's more likely that this "communiqué" is mere opportunistic lying.

Regardless of early indications, U.S. officials might have publicly ruled out terrorism anyway in the early hours of the blackout, the better to preempt panic as people tramped down Manhattan and across the Brooklyn Bridge last Thursday on their soggy way home. In any case, it soon seemed clear that there had been no overt sabotage of equipment or blowing up of a power station or a transmission line. No evidence has emerged of cyber-terrorism either. The relevant computer systems were being monitored at the time, and the professionals familiar with the monitoring claim that any such cyber-hack would have been logged.

Looks like what we should worry about here is what we already knew we had to worry about: the anti-developmental scourges of environmentalism and regulatorianism. We have an aging electrical power grid combined with ever-accelerating demands for electrical power, combined with the standard unwillingness to relinquish political power, combined with rusty and antiquated collectivist ideology that keeps shorting out entrepreneurial fuses.

The autopsy of the event continues. But it really doesn't matter exactly where the electricity popped and initiated the cascade, or even exactly how. Somewhere, probably in Ohio, too much power piled up, and the electricity zigged when it should have zagged, something shut down and the excess was shunted to somewhere else, and then more systems shut down to protect themselves, and the problem kept bouncing down the line, until eight states and Canada were involved.

According to the Platonic ideal of Grid Qua Grid, the national super-grid should have performed better. Failsafe mechanisms to prevent the cascading of power outages throughout an ever-enlarging geographical area both worked and did not work. They failed, obviously, throughout much of eight states and, if you want to count it, Canada. But the problem also obviously did not spread beyond the affected area; there were margins at which operators and systems were able to shut down the shutdown and keep it from going south and west.

The experts tell us that the inaugural event, some power surge, is not all that unusual, especially given the way electricity is flowing all around the country these days to accommodate buying and selling in the (partially) deregulated power market. But normally, routine mechanisms insulate the problem from the rest of the grid--that very complicated, interconnected grid whose complex and somewhat rickety interconnections prove that we have a "third world power system," according to one "expert." (A former energy czar; gee, where were he and his magic wand during the Clinton administration?)

Deregulation is being blamed for what just happened. It doesn't matter that there were also major blackouts in the Northeast in 1965 and 1977, long before the partially deregulated markets failed to do what only totally deregulated markets can do. The bureaucrats go by a simple credo: Freedom bad, command-and-control good. So we're already hearing sober analyses about how while deregulation is swell in pie-in-the-sky theory, it does need to be properly coordinated by totalitarian dictators out of Washington.

Not everybody denigrates deregulation. Obviously, there must be some glimmer of knowledge of economics, and perhaps even ethics, including among public officials, for any substantial deregulation of an industry to occur. Unfortunately--just as we have seen in the airline industry--many of our masters don't really trust people to do their jobs as if they might possibly have some vested interest in meeting the needs of the consumers who pay their rent. So such deregulation as takes place ends up being done half-and-half. Airlines can compete, sort of, but the FAA is still breathing down everyone's necks about everything, and airports are still not privately owned, and air traffic control is still not a private enterprise either, and nobody can build a new runway.

And now, the great mystery is why we don't have enough transmission lines to ferry electricity and why these transmission lines aren't as robust as we'd like them to be.

Actually there are two mysteries. One is why anything ever gets done in any industry that requires complex sequences of production, such as ones that produce heavy equipment. The other is how the necessary heavy equipment gets produced in other industries despite the enormity of the task, but does not seem to be getting produced in the power industry. At least not when it comes to transmission lines that everybody agrees need to be upgraded, replaced, and/or supplemented.

Some claim that the power business is so dispersed and variegated now--so "chaotic," you know, a la markets--that nobody can possibly have an "incentive" to build or rebuild the transmission lines. Some claim that all the competing power companies--many of which, unbeknownst to the opponents of deregulation, are still protected monopolies in their geographical area--represent a chaos that must be managed and brought into line from, of course, above: by command-and-control government. After all, how else to coordinate proper transmission of power from one part of the grid to another? Things are just too messy and complicated down there in the market, so there has to be some guy at the top keeping track of it all, Fred maybe.

But by this reasoning, we should have been suffering massive country-wide blackouts every two hours for the past twenty-five years, instead of just once, a few days ago. By this reasoning, it is a puzzle how the power companies were able to get the power back on line at all, with no Grid Czar in DC to dispense instructions on exactly when to begin flipping the relevant switches.

Of course, everyone in the power business throughout the eight affected states realized that the power had to be brought back on line in a progressive, sequential, cautious way; and acted accordingly. That's because that's what they do for a living.

And of course, it is indeed metaphysically possible for people who create and transport power for a living to create and transport power without Papa State peering over their shoulders and telling them exactly how to make sure all the electrons are lined up properly.

But then, why aren't the transmission lines being improved and supplemented?

Let's imagine what might happen if a dark mystical force emerged into this dimension from another dimension and eliminated the entire national power grid in an instant--but left all the power plants and generators intact--and then shambled back to its own dimension. Would the power companies just shrug their shoulders and say, "Well, ain't no transmission lines, so obviously, nothing to do but go out of business"?

No. There would still be massive demand for power. And, therefore, profit to be earned by delivering that power. This means that there must be profit in building and maintaining transmission lines, at least potentially. The power companies would only deny it if they knew they would somehow be stopped from profiting from the necessary massive new investments. They would only decline to invest if they were banned from investing--by which I mean investing that is investing, i.e., the kind of investing that could bring returns if one were in a market.

Now consider the world that actually exists with its actual problems and potentials. In this world, the problem is not that transmission lines are different from all other things that are made; everything is different from all other things that are made, and many of those other things also have complex interconnections with other things. That is why we have specialists, people who know more about one thing than they know about other things. And that is why we have market-coordinating mechanisms like prices.

Nor is the problem "deregulation." The problem is mincing, half-assed, can't-let-it-happen deregulation. The problem is the combination of do-as-you-like in one aspect of the industry, and don't-you-dare in some other aspect of the industry. Feel-free / Better-not!...Go-ahead / Stop! Wasn't your mom like that? And how the hell could you ever plan your day on that basis? Obviously, you had to just ignore mom. But you can't just ignore the government.

Jerry Taylor and Peter VanDoren at the Cato Institute point out that although deregulation has "been fingered as a culprit...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." And VanDoren's big Cato study on "The Deregulation of the Electricity Industry," published in 1998, argues that vertical integration, a structure of production "in which generation and transmission services are jointly owned, is an effective solution to the externalities that independent generators impose on a transmission system. Before we take apart vertically integrated utilities, we should consider simple deregulation, the elimination of state-granted franchise monopolies."

In other words: let market competition, true market competition, determine optimal ways of doing things. The people who figure out how to do it best will make the most money, and then other people will emulate them--because they will be free in a free market to do things the best way. And will want to. Because they can make more money that way.

But Cato forgot to use a bullhorn.

Do we want more transmission lines? Do we want The Grid to be more robust?

Then free it all up. Let prices go where they may. Let power companies own everything they want to own, so they can be directly responsible for everything they do. Don't threaten to pull the deregulatory rug out from under them. Don't make everybody worry about whether their huge investments in new equipment and relays are going to be stolen from them or re-regulated down the line. Don't let anti-civilization environmentalists or anti-civilization local homeowners stop anybody from building anything he wants on his own private property. And let there be five or ten utilities in our town to pick from instead of just the one.

We don't need command-and-control from the federal government. We need wholesale deregulation, wholesale freedom, just as fast as it can possibly be phased in. If, given the mess of the current half-slave half-free system, we have to have a law that such-and-such failsafe mechanisms must be instituted where they are not currently instituted, as a stopgap, fine, pass that law. But don't use the blackout as an excuse to re-regulate up and down the whole industry, vertically and horizontally and sideways, as if a guy at the head of an agency in DC can know what every electron in the country is doing at every moment, just because he is the head of an agency in DC. He can't and doesn't and won't. There are already more regulations imposed on American businesses than there are electrons in the universe. Enough already.

The people on the scene know their jobs, and they know how to port power from where they are to where they want it to go. And if you want them to invest in capital equipment so they can do it even better and more reliably, you have to let them reap the rewards of doing so. Which means you have to allow markets to flourish--free, unfettered markets, in which businessmen and engineers can make plans from one day to the next without fear of ecological or regulatory sabotage.

Just get out. Just get the hell out of the way. Let people do their damn jobs and supply the damn demand for the damn power. Don't prop up anyone who's failing and don't penalize anyone who's succeeding.

Let there be Freedom, and there will be Light.

[Reprinted with permission of The Crunch Report.]

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