The ‘No Electric Resiliency Cabal’

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The electric utilities are the last major industry to operate under 19th Century regulatory arrangements

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Last Thursday, the Senate Energy and Natural Resources Committee convened what appeared to be a most timely – and much-needed – hearing.  It’s title was “Keeping the lights on:  Are we doing enough to ensure the reliability and security of the electric grid?”  Unfortunately, despite abundant evidence to the contrary, the answer we got from industry and regulator witnesses and legislators alike was an unfounded, and profoundly misleading, “Yes.”

Just about everyone seemed to be toeing the line laid down by Gerry Cauley, the president of what amounts to an electric utilities trade association called the North American Electric Reliability Corporation, better known as NERC.  It might as well stand for the No Electric Resiliency Cabal.

The see-no-evil, hear-no-evil, speak-no-evil tone of the Energy Committee hearing was all the more remarkable for it coming almost exactly a year after an attack on the Metcalf transformer substation outside San Jose, California.  That event demonstrated that we are clearly not “doing enough to ensure the reliability and security of the electric grid.”

After all, the Metcalf attack very nearly destroyed at least seventeen (and possibly all twenty-one) of the substation’s high-voltage transformers – assets that are indispensable building-blocks of the electric grid and effectively irreplaceable in the short- to medium-term. The effect would have been not only to turn off the lights in Silicon Valley and the San Francisco Bay area for protracted periods.  According to the chairman of the Energy Committee, Sen. Mary Landrieu, the Metcalf assault was “the most serious attack ever” on the U.S. electricity system and reportedly came “very close to causing the shut-down of a large portion of the Western grid.”

Yet, the principal focus of the hearing seemed to be “shooting the messenger,” in this case Wall Street Journal reporter Rebecca Smith, rather than squarely addressing aspects of the grid’s acute vulnerability that she has identified in a series of front-page articles.

Specifically, the assembled legislators and witnesses spent most of their time complaining that Ms. Smith had exposed the fact that the grid had been attacked a year ago in a highly professional operation – a fact that had largely been concealed from public view.  They were also distressed that she had obtained and published information obtained from the Federal Energy Regulatory Commission (FERC) indicating that the destruction of a small number of such substations would crater the grid.

The rest of the exchanges between legislators and those testifying – including, in addition to Cauley and other industry representatives, Cheryl LaFleur, FERC’s acting chairman – amounted to a concerted effort to “circle the wagons.”  Congratulations were offered all around for the splendid way in which the energy sector has dealt with physical, cyber and other threats, promulgating standards and otherwise ensuring grid resiliency.

The only trouble is that, as the Metcalf incident demonstrated, the grid is actually far from resilient.  And the so-called “private-public partnership” between FERC and NERC that is supposed to regulate the electric industry – far from working “quite well” (according to Ms. LaFleur) and “quite well” (according to Mr. Cauley) – is actually contributing to its continuing vulnerability, not eliminating it.

In fact, the electric utilities are the last major industry to operate under 19th Century regulatory arrangements.  Imagine, for example, the airlines, banking system, nuclear power or pharmaceuticals being regulated by their respective trade associations.  You would have situations much like we confront with NERC (which actually has responsibility for setting resiliency and security standards; the Federal Energy Regulatory Commission’s authority has been limited by statute to proposing regulations, not dictating them).

In practice, this has meant that, despite the self-congratulatory blather at the Senate Energy Committee hearing, such regulations as are promulgated are late in coming and generally inadequate.  For example, three weeks after the Metcalf, NERC inexplicably canceled work on the development of a physical security standard for the utilities.  They only got pressure from FERC to resume that effort after the Wall Street Journal broke the story of last April’s close-call.

Then, NERC cynically chose to release the draft standard at 7:00 p.m. the night before the Senate hearing.  Perhaps that was because, had it been subject to close scrutiny, some Senator might have asked why, as Tom Popik of the Foundation for Resilient Societies has observed, the draft fails to require protection for the control centers that serve 140 million Americans, including many in California whose lights nearly went out – and stayed out – a year ago.  FERC had specifically asked for control centers to be included but, when they can only request meaningful standards, rather than require them, what you get is substandard.

It would be good if lawmakers really were to seek honest answers to the question of whether enough is being done to keep ensure the reliability and security of the grid.  If they take the word of the No Electric Resiliency Cabal, however, the American people are going to be kept in the dark about the existential threat we face due to grid vulnerability.

Given the threats from both enemies who understand all too well that vulnerability and from a sun that is due to unleash a devastating solar storm in the foreseeable future, the upshot of keeping us ignorant and, thereby, deflecting public pressure to harden the grid, may just be that we find ourselves kept in the dark permanently.

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