WASHINGTON – The energy cooperative that includes Maryland is “a model we like” that other regions should emulate as they work to safeguard the power grid against terror attacks and widespread outages, a federal official said Wednesday.
Federal Energy Regulatory Commission Chairman Patrick Wood III said the PJM system, which distributes power in Pennsylvania, New Jersey and Maryland and parts of other states, is already being adopted in the Northeast and parts of the Midwest. The Southeast and California will be adopting similar models in the coming months.
“We will see how that plays out,” Wood said.
But John Derrick Jr., the chairman of the board of Pepco Holdings, cautioned that PJM members have been working together for decades and that other areas will face a “big learning curve” as they move to this region’s model.
“The best that I’ve seen is the PJM. The PJM is doing all this stuff quite well in a fairly transparent way . . . but not perfect,” Derrick said.
PJM is a cooperative system of power generators, distributors and merchants who sell electricity to homes and businesses in the region. Besides its cooperative makeup, Derrick noted that PJM keeps a 16 percent energy reserve at all times, which helps buffer the system against outages.
Wood and Derrick spoke at a panel that met to discuss safeguarding the U.S. power grid from terrorist attacks and preventing power interruptions like those caused by the August blackout that spread across the Northeast and into the Midwest and Canada.
In addition to changing the model on which power grids operate, Wood said that up to $50 billion will have to be invested nationwide over the next 20 years to assure a reliable power supply. That money is needed to build up existing transformers and put smaller transformers in decentralized locations, he said.
Wood said he worries about the power grid being vulnerable to terrorists: “It is the most visible infrastructure we’ve got aside from highways.” But he believes Americans can safeguard the grid by making it “more robust and redundant.”
Derrick agreed, but said that utilities need the government to let them raise rates to pay for investments in security. Utilities have come to a place “when we’ve run out of string and the prices need to go up,” Derrick said.
He recognized the need for oversight, but said utilities would feel responsible for keeping the lights on, with or without regulatory pressure.
But Wood called for more regulatory authority, and more money, for the FERC. He praised the energy bill currently being pushed through Congress, saying it will give the commission some of what it needs.
“We’ve got very limited teeth,” Wood said.
But he agreed with Derrick that the utilities need to get a return on investment in security upgrades if they are going to attract shareholders.
“FERC has to make sure that utilities get their money back,” Wood said.
The panel also talked about the possible repeal of the Public Utilities Holding Act of 1935 — a move that would let other companies buy into electric and gas utilities — and the potentially dangerous consequences if the Department of Homeland Security created an inventory of utility infrastructure. Such an inventory could be turned into a terrorist “hit list,” they said.
“We’re still trying to figure out how to operate in American in a post-9-11 world,” Derrick said. “In the meantime, we’re all very nervous.”