Government Oversight After the 2003 Northeast Power Blackout

Cause of the 2003 Northeast Power Blackout

The 1965 Northeast Power Blackout left 30 million people without power for up to 13 hours. It was the first time that the public understood that there could be such a large scale loss of this critical service. In response to pressure from the Federal Power Commission the utility industry implemented extensive operational and planning changes. Those changes were supposed to prevent future large scale power blackouts. But, on August 14, 2003, an even larger Northeast Power Blackout occurred.

The 2003 Northeast Power Blackout left 50 million people from Detroit, Michigan to Toronto, Canada without power. It left homes and businesses in the dark and without air conditioning. It stranded workers and subways and on elevators. Commuters were caught in gridlock as street-lights stopped working. And water supply was at risk as electric pumps used to transport the water had no power to operate.

Satellite image of 2003 Northeast Power Blackout
Satellite image showing the 2003 Blackout of the Northeast United States
Source: elp.com

The 9/11 attack on the World Trade Center was still fresh in the public’s mind in 2003. And this looked like another terrorist attack. But terrorists had nothing to do with the 2003 Northeast Power Blackout. It was, instead, caused by a combination of human error and an aging electric grid.

Utility Response to the 1965 Northeast Power Blackout

This was not supposed to have happened. After the 1965 Northeast Power Blackout the electric utility industry promised that they would take action to prevent future wide scale outages.  They created nine regional planning organizations. Those organizations coordinated transmission planning among multiple utility systems. In addition to the planning organizations the industry created the National Electric Reliability Council (NERC) whose role was to develop uniform reliability standards for the industry.  

Policy makers may have thought about government oversight of the utilities’ promises. But the utilities convinced the regulators that they understood the importance of keeping the lights on. They said that they were committed to doing whatever it took to prevent future wide scale outages. They promised voluntary compliance with the standards being promulgated by the NERC. There was no government oversight.   

Failure of Voluntary Compliance

Fast forward 38 years and it turned out that not all of the utilities shared the same commitment to reliability. Instead, many used this time to focus their efforts on maximizing profits in a rapidly deregulating electric industry. 

A prime example was FirstEnergy Corp. FirstEnergy is the current corporate name of what used to be Ohio Edison Company, a local electric utility headquartered in Akron, Ohio. During the late 1990s and early 2000s Ohio Edison acquired Centerior Energy Corporation (consisting of the old Cleveland Electric Illuminating Company and the old Toledo Edison Company) and General Public Utilities (consisting of the old Jersey Central Power and Light, Pennsylvania Electric Company and Metropolitan Edison). 

During the years that it was focusing on its growth FirstEnergy grew lax in its reliability obligations. The 2003 Northeast Power Blackout started when a FirstEnergy-owned high voltage line came into contact with a tree and went out of service. Had FirstEnergy complied with the NERC’s standards the tree in question would have been trimmed and the contact would never have occurred. 

But the failure to trim the tree was not the only issue. A computer system required by the NERC standards should have notified FirstEnergy operators when the line went out of service so that they could take action to prevent the spread of the outage. However, the computer system in question was out of service. And, even if the system had been in service, there have been suggestions that the FirstEnergy operators were not trained in how to respond to receipt of the computer signal.  

The 2003 Blackout was the result of a failure of voluntary compliance. Congress decided that, if we are going to be assured of the reliability of the transmission grid, compliance with reliability standards are going to have to be mandatory.

Implementation of Mandatory Reliability Standards

In the Energy Policy Act of 2005 Congress gave the Federal Energy Regulatory Commission (FERC) authority to enforce mandatory reliability standards adopted by the NERC (now renamed the North American Reliability Corporation). The Act also gave FERC authority to assess penalties of up to $1.0 million per day for failure to comply with the standards.  FERC established nine Regional Entities who are responsible for enforcing the NERC reliability standards. Those reliability standards include practices required to defend the system again cyber-attacks.

Front of FERC building
Source: naturalgasnow.org

It is never easy for businesses to conform their operations to a new regulatory scheme. However, one would have thought that, when faced with potential penalties in the millions of dollars, the members of the utility industry would have done its best to comply.

FERC gave the industry a phase-in period of several years during which it assessed only nominal penalties. After the end of the phase-in period the utilities should have been up to speed. Compliance with the reliability standards should have been part of their day-to-day business. So industry watchers were surprised when, in February, 2019, Duke Energy, a utility owning and operating transmission facilities from Florida to Ohio, was fined $10 million for as many as 125 violations of the NERC standards going back over a period of three years. 

After the 1965 Northeast Power Blackout the utilities showed that they could not be trusted to voluntarily comply with reliability standards where there was no risk of penalty. Unfortunately, it is not yet clear that the utilities are any better with complying with mandatory reliability standards where the risk of penalty for non-compliance is significantly higher.

Author

I. David Rosenstein worked as a consulting engineer and attorney in the electric industry for 40 years. At various times during his career he worked for utility customers, Rural Electric Cooperatives, traditional investor owned regulated utilities and deregulated power generation companies. Each of his posts in this blog describes a different aspect of the past, present or future of the electric industry. 

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