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Prepared Witness Testimony The House Committee on Energy and Commerce
Blackout 2003: How Did It Happen and Why?
Full Committee on Energy and Commerce
Mr. Richard Kessel
My name is Richard Kessel and I serve as Chairman of the Board and Chief Executive Officer of Long Island Power Authority (Authority) located on Long Island in New York State. As an instrumentality of the State of New York and a public power agency, the Authority and its operating subsidiary, the Long Island Lighting Company d/b/a LIPA (LIPA), provide electric service to nearly 1.1 million customers, representing approximately 2.8 million people in Nassau and Suffolk counties, and the Rockaway Peninsula in the Borough of Queens, New York City. Three weeks ago, on August 14, 2003, LIPA and its customers were caught up in the Northeast power blackout which affected much of the Northeast United States and South Eastern Canada. Through the cooperation of LIPA customers who limited their demand and the committed work of LIPA employees and the employees of our service contractor, KeySpan, over 80% of LIPA customers had their power restored by 8:30 A.M. on August 15th and all customers had electric service restored within 25 hours, 21 minutes of the blackout. The blackout provides a telling example of the fragility of our electric transmission system and the need to continue our efforts to improve system reliability. We at LIPA are as committed as the members of this Committee to analyzing this situation and ensuring the prevention of a similar occurrence. For that reason, I want to thank Chairman Tauzin for calling this hearing and for providing me with the opportunity to speak on behalf of the LIPA's customers regarding what happened on August 14, 2003, and to provide recommendations on actions that can be taken to improve our electric transmission system and overall reliability. LIPA - PROVIDING RELIABLE ELECTRIC SERVICE TO ITS CUSTOMERS ON LONG ISLAND The Authority and its operating subsidiary, LIPA, own and operate the transmission and distribution system on Long Island while also providing retail electric service to customers on Long Island. The Authority was established in 1986 by the New York State legislature to resolve a controversy over the Shoreham Nuclear Power Plant and to achieve lower utility rates on Long Island. Created as a corporate municipal instrumentality of the State of New York, the Authority was authorized under its enabling statute to acquire all or any part of the securities or assets of the Long Island Lighting Company (LILCO). In May 1998, the Authority acquired LILCO as an operating subsidiary. This acquisition resulted in an average rate reduction of 20% to the Long Island ratepayers. LIPA owns 1,344 miles of transmission and sub-transmission lines that deliver power to 175 substations in its electric system. From these substations, 13,075 circuit miles of distribution lines deliver the power to nearly 1.1 million business and residential customers. In addition, Long Island is served by five operating transmission interconnections to neighboring electric systems and a new high voltage direct current interconnection to Connecticut - the Cross Sound Cable - that is ready for full commercial operation which has been delayed for more than a year due to a permitting moratorium enacted by the State of Connecticut in June 2002. Instead, operation of the Cross Sound Cable has occurred only as the result of emergency operating orders issued by the Department of Energy for a short period of August and September, 2002 and since August 15th in response to the Northeast power blackout. LIPA is committed to finding creative solutions to the provision of economic, environmentally sensitive and reliable electric supply for its customers. Historically, there have been reliability and service issues for the residents of Long Island. As an island with a robust economy, the demand for electricity on Long Island has been growing at a record rate in recent years. On average, for the past several years, our demand has grown at a rate of approximately 100 megawatts (MW) per year. For example, in July 1999, a four-day heat storm produced a summer peak demand record for LIPA of 4590 MW and 4757 MW for the Long Island Control Area. That 1999 LIPA record was 382 MW higher than the previous summer record of 4208 MW set in July of 1998. To provide some perspective, however, at the time of the August 14th system disturbance, all of the Long Island generation was functioning well with a typical summer demand load of 4677 MW-a demand level that, just four years ago, was a summer peak demand record. And this demand continues to grow. The peak demand in the Long Island Control Area for 2002 was 5059 MW. Meeting this load growth, however, is not an easy task. In many ways, Long Island is a microcosm of the difficulties that face electric utilities today in providing the reliable and cost-effective energy that is critical to our local, state and national economy. Over the past several years, LIPA has taken aggressive steps to maintain and enhance the existing electrical system on Long Island to meet customer demand and improve reliability. The initiatives that LIPA has undertaken include:
Electric energy is not a luxury. We must ensure that the infrastructure supporting the delivery of electricity to our customers is up to the critical task of ensuring that our homes are lit and our businesses have the electricity necessary to produce the goods and services that support our economy. On October 17, 2002, LIPA released its Draft Energy Plan which details a comprehensive, multi-faceted and flexible approach to providing a safe, reliable, environmentally friendly and cost efficient supply of electricity to LIPA's customers well into the future. In addressing the transmission and distribution components of the Draft Energy Plan, the first and foremost criteria for identification of projects was the ability to improve system reliability. In order to meet demand and maintain reliability, LIPA has invested heavily in transmission infrastructure and will continue to do so. Since taking ownership of the Long Island transmission and distribution (T&D) system in May of 1998, LIPA has invested $1.01 billion in our T&D system. The expenditures have been made on a wide range of projects including new transmission and distribution lines and upgrades of existing lines, new substations and upgrades of existing substations. In 2002, LIPA invested nearly $332 million in improvements to the T&D system alone. LIPA's 2003 budget commits an additional $240 million to such improvements. Projected expenditures for 2004 could reach $216 million, with expenditures for 2005 reaching nearly $200 million. As part of its efforts to improve the overall transmission infrastructure serving Long Island, since 1998, LIPA has worked to establish a new interconnection between New York and New England across Long Island Sound - which ultimately became the Cross Sound Cable project. Constructed in 2002 by TransEnergie U.S., Ltd. (TEUS), the transmission line interconnects the New England and New York control areas and is capable of transporting 330 MW of electricity between Long Island and Connecticut. Although LIPA is not the owner or the operator of this transmission line, LIPA's involvement in the project has been critical to its construction and completion. By entering into a Long Term Firm Capacity Purchase Agreement with TEUS in August of 2000, LIPA provided the necessary support for the financing of this project. The development of this merchant transmission line, in addition to LIPA's other efforts, is necessary to continue to serve the growing demand for electricity of the residents of Long Island. Most recently, as part of our ongoing efforts to improve the transmission system, on August 28, LIPA announced a Research and Development (R&D) project with DOE and a consortium of manufacturers, led by American Superconductor of Massachusetts for the installation of a superconductive cable. This $30 million project will test the world's first installation of a superconductor cable in a live grid at transmission voltages. Called high temperature superconductor (HTS) power transmission cables, superconductors can transmit two to five times the amount of electricity through the same space occupied by existing cables. The 2000 foot 138kV transmission superconducting cable will be demonstrated as a portion of a circuit located in an existing right-of-way in East Garden City. Project development has already begun, and the superconductor cable will be installed in the fall of 2005 with full operation scheduled for the end of 2005. If the R&D demonstration proves successful, LIPA would look to continue building the superconducting cable to the next substation. Connecting the two substations would provide a capacity of 600 megawatts. Maintaining system reliability is a key mission for LIPA. LIPA is a founding member of an international public/private R&D partnership to apply new technologies to electric T&D systems to create a "self healing" grid that will detect and correct problems before they occur. Called the Consortium for the Electric Infrastructure to Support a Digital Society (CEIDS), some 15 entities, including the U.S. Department of Energy (DOE), the New York Power Authority (NYPA), Consolidated Edison Company of New York Inc., Cisco Systems, Lockheed-Martin, and Electricite de France have joined in the effort to develop the "self healing" grid technology concept. The CEIDS effort is part of the R&D projects spearheaded by the Energy Innovation Institute (E2I) a subsidiary of the Electric Power Research Institute (EPRI). Development of a "self-healing" transmission and distribution system - capable of automatically anticipating and responding to disturbances, while continually optimizing its own performance - will be critical for meeting the future electricity needs of an increasingly digital society. LONG ISLAND'S EXPERIENCE DURING THE BLACKOUT OF AUGUST 14 The events and circumstances of the Northeast blackout are still being examined through such efforts as the U.S./Canada Power System Outage Task Force (Joint Task Force). LIPA, as a transmission owner and load-serving entity in New York, has been cooperating with the Joint Task Force. Until the Joint Task Force completes its work, it is difficult to speculate on any one set of factors or conditions that may have caused the system disturbance. From Long Island's perspective, what we presently know is that in the moments leading up to the blackout, the Long Island transmission and distribution system was operating under normal summer conditions with a load demand of approximately 4,677 MW. There were no major generation facility outages on Long Island. Of the interconnections between Long Island and the rest of New York State and New England, the Y49 and Y50, 901 and 903 Cables were operating and had scheduled power flows. Due to operational rules regarding the interchange of energy between New York and New England, the fifth line interconnecting to Long Island, the Northport-Norwalk Tie had no scheduled power flow moving over its lines. The Cross Sound Cable, however, was de-energized due to the Connecticut siting moratorium that has delayed environmental review of a permit modification required prior to commercial operation of the facility. LIPA has emergency plans to address blackouts like the August 14th event. Consistent with LIPA policies and plans, our emergency plan was immediately put into place when our system operator, KeySpan, called a "Condition Red." Less than twenty minutes after the blackout, LIPA had put its first "black start" generating unit into service which served as the foundation of the system recovery. At 5:15 P.M., just an hour after the blackout, LIPA's emergency team was assembled to assess system conditions and determine critical tasks that needed to be undertaken. Attached to my testimony as Appendix A is a presentation that LIPA recently released detailing the power restoration efforts that took place. The Long Island T&D system and the interties with New England and the rest of New York State were a critical component of the power restoration efforts. During the restoration effort, LIPA's interties were used to provide emergency energy support and to connect LIPA's system to the Northeast power grid thus stabilizing system frequency. The interties were a valuable tool during LIPA's efforts to complete the restoration of its entire system. At 11:45 P.M., August 14th, LIPA received notice from the Department of Energy that Secretary Abraham, acting upon a request from Governor Pataki, had issued an emergency order immediately directing the operation of the Cross Sound Cable pursuant to Section 202(c) of the Federal Power Act. Once active, the Cross Sound Cable provided essential electricity to Long Island and helped stabilize voltage on both Long Island and in Connecticut. Cross Sound Cable transmitted 15,000 megawatt-hours of electricity over the critical three-day restoration period following August 14, enough to repower about 300,000 homes on Long Island. The ultimate effect of the Northeast blackout on Long Island is still being tallied. Estimates have been made that LIPA, alone, may have incurred an economic loss of $20,000,000. An assessment of LIPA's T&D system is still ongoing but preliminary assessments suggest that most of LIPA's transmission and distribution facilities were unharmed. However, LIPA has already determined that there was damage to a major power station step-up transformer and other facilities on its system, including damage at several transformers and substations. It is still too early to provide definitive opinions about what went wrong on August 14th or what equipment worked exactly as intended or not. However, in LIPA's opinion, it is clear that there is a lack of transmission infrastructure - both lines and systems - necessary to address a massive outage such as this one or to facilitate the restoration of service to our customers. There may not be one piece of equipment or hardware that would have prevented such a widespread outage. However, we do know that the Cross Sound Cable, had it been in commercial operation rather than sitting idle due to a politically-motivated siting moratorium in Connecticut, would have, at the very least, reduced the time for restoration of power to Long Island residents. In this case, the Secretary of Energy properly stepped in and issued an emergency order to facilitate the use of the Cross Sound Cable in LIPA's power restoration efforts. I firmly believe that it did not, and should not, have to come to the issuance of an emergency order to initiate power flows over the Cross Sound Cable. It is the failings of the present system, that has allowed parochial politics to override the legitimate need for additional interstate transmission lines such as the Cross Sound Cable, that we must address if we are to move towards improving the reliability of our electrical grid. LESSONS LEARNED FROM THE BLACKOUT AND HOW SIMILAR INCIDENTS IN THE FUTURE CAN BE PREVENTED
The Northeast blackout demonstrates the need for improving system reliability through updates to operating protocols, modification of system management software, emergency planning and infrastructure investments. Many of these actions do not require Congressional action. However, other matters surely require Congressional attention-in particular, LIPA urges Congress to consider improvements that can be made in: (1) ensuring the optimization and full utilization of existing facilities such as the Cross Sound Cable to ensure system reliability; (2) facilitating new investment in transmission infrastructure by ensuring that there is certainty in cost-recovery and that all benefits of new transmission investments are captured in the compensation mechanisms; (3) removing obstacles to timely siting decisions for transmission facilities and avoiding multi-jurisdictional in-fighting over interstate transmission facilities; and (4) ensuring the development of effective reliability criteria. Ensuring Full Utilization and Optimization of Existing Facilities to Support Regional Reliability. The failure to fully utilize existing transmission facilities to ensure the efficient and reliable delivery of energy is unconscionable. For many of the same reasons that its energization pursuant to Secretary Abraham's emergency order gave LIPA a critical asset in its efforts to restore power to Long Island, the high voltage, direct current, Cross Sound Cable could have provided valuable assistance in efforts to stem the tide of the system disturbance that ultimately blacked out Long Island. As detailed in Appendix B, which describes the history of the Cross Sound Cable, state parochialism in the form of a Connecticut state siting moratorium has kept this cable from being placed into commercial operation-even though it is fully constructed and its operation will not result in adverse environmental conditions in Long Island Sound. Since the blackout, the Cross Sound Cable has been operating subject to an Emergency Order from the Department of Energy. Last Thursday, the Secretary extended this order, finding that emergency conditions continue to exist since there has been no authoritative determination of what happened on August 14th or why the existing system was unable to stop the spread of the outage. As a result, the Secretary directed that the owners of the Cross Sound Cable continue to energize its facilities to transmit and deliver electric capacity between the New York and New England control areas as well as to provide voltage support and stabilization facilities in accordance with normal operating and scheduling protocols in the NYISO and ISO-NE during the continued existence of emergency conditions. While the Order allows operation of Cross Sound Cable at this time, it is subject to revocation at any time. We must do more than just recognize the Cross Sound Cable's contribution to removing emergency conditions and allow the facility to be placed into full commercial operation so it can fully support and enhance the reliability of the adjoining New England and New York control areas. Another example of the lack of full utilization of existing facilities is that, presently, the NYISO and ISO-NE do not allow for separate power schedules to flow over Northport-Norwalk Harbor intertie and routinely set the available transmission capacity of this intertie to zero in favor of sending all flows between New York and New England over AC interties in upstate New York. While the NYISO and ISO-NE certainly have operational responsibility to determine a reliable power flow within their control areas and between the two regions, removing certain facilities completely from the available options does not provide the full amount of flexibility that can and should be present in the New York and New England systems. LIPA has been working with the NYISO and ISO-NE to resolve this matter. However, even under the most optimistic estimates a permanent solution is unlikely to be in place before Summer 2004-at the earliest. We must ensure that existing transmission facilities are fully utilized. Actions must be taken to immediately direct the operation and full utilization of existing interstate transmission facilities, such as the Cross Sound Cable, to support reliability while ensuring that such operations are conducted in a manner that protects the environment. Certainty of Cost-Recovery and Recognition of All Benefits Provided by New Transmission System Investments. At present, transmission owners are faced with a regulatory environment that does not provide certainty in rate recovery and does not fully recognize the reliability and market-related benefits created from transmission system improvements. This issue is not merely a question of what rate of return should be provided to a transmission owner. Rather, there is a more fundamental uncertainty as to whether, regardless of the rate of return applied to the expenditures made, cost recovery would ever actually occur. Further, all benefits of transmission investments must be recognized. Transmission facilities can provide reliability benefits, facilitate additional energy exchanges, improve access to additional installed capability resources, and provide voltage support. Further, there are innovative, leading-edge and smart technologies, such as high temperature superconductor (HTS) power transmission cables and 'self healing' grid technologies that can infuse the transmission system with additional flexibility. Simply providing for cost recovery through a traditional transmission usage charge does not fully recognize the benefits provided by the new generation of transmission investments that electric utilities, like LIPA, are making today. Ultimately, the federal regulatory framework for wholesale transmission service must allow for cost-recovery certainty and fully recognize and capture the multiple benefits to the market and reliability that are created by transmission system improvements. Removing Obstacles to Transmission Facility Siting. One of the most glaring issues that must be addressed to ensure future investment in transmission facilities is the complexity of siting multi-state transmission facilities. As a matter of course, transmission lines often cross multiple jurisdictional boundaries. Unlike interstate natural gas facilities (that are subject to siting certificate approval from a single entity, FERC), construction of an electric transmission facility can require the approval of multiple siting authorities. Furthermore, there is no standardization of facility siting review requirements or timelines for approvals. The result is a patchwork of siting authorities, with each one having the ability to fundamentally affect the ability of a particular project to proceed. LIPA believes that there must be a reconsideration of how siting decisions are made for interstate transmission facilities to ensure that there is not parochial, jurisdictional interference in the functioning of what is truly an interstate market in electric energy. The Mid-Atlantic and Northeast states are too densely populated and too interdependent economically and environmentally to permit one recalcitrant state to block environmentally benign and urgently needed infrastructure. LIPA has no objection to reasonable state oversight of permitting to ensure that legitimate local and environmental concerns are met. However, the fact remains that interstate transmission lines do not serve a single jurisdiction and provide critical bridges for regional reliability. A federal framework must be in place that ensures that interstate transmission facilities that are needed for reliability are not stymied by conflicts between multiple jurisdictions or political interference. Such a framework may be achieved through a number of different mechanisms, such as a one-stop siting approval procedure before FERC; or allowing the Secretary of Energy or FERC to direct the construction and operation of an interstate transmission facility upon a specific finding that it is required for regional reliability and can be accomplished with all necessary environmental safeguards. Ultimately, what is needed is a clear path by which critical, reliability improvements to the interstate transmission system can be made in a timely manner. Improving Reliability Criteria and Coordination. The development of effective reliability criteria is a critical element in transmission system planning. As transmission system investments are made, it is important that such investments in new technologies and facilities incorporate and accommodate the appropriate reliability criteria to ensure a more stable and reliable network. To that end, the current reliability criteria and structure for regional reliability coordination should be reviewed and recommendations made for improvement. Further, reliability benefits of transmission system improvements must be fully recognized through such mechanisms as payments for generation. RECOMMENDATIONS FOR CONGRESSIONAL ACTION In closing this testimony, LIPA urges Congress to take the following steps to ensure that our nation can be served by a safe, efficient and reliable transmission and distribution system:
LIPA looks forward to working with Chairman Tauzin and all members of this Committee on passage of legislation that enhances the reliability of our electric transmission and distribution systems.
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