Centralization of control center operations could increase security risks for the nation’s electric transmission grid

HAUPPAUGE, N.Y., Sept. 21, 2001 — According to Steve S. Garwood, Vice President of R.J. Rudden Associates, the events of Tuesday, September 11, 2001, demonstrated the vulnerability of U.S. security to unprovoked attacks on our national infrastructure.

As we contemplate our vulnerability from such attacks, we should not overlook our electric power system as one such critical infrastructure that, if targeted, could have devastating results. Recent articles have been published that warn of the potential vulnerability of large generating facilities such as nuclear power plants, and major components of the physical transmission system, such as lines, substations and towers; however, another, potentially less obvious component of the electric power system is the information and technology infrastructure necessary to coordinate and control all of the components of our integrated electric power system. This infrastructure is the neurological center of the nation’s electrical grid; and as such is critical to the well being of the entire economy.

Recent Federal Energy Regulatory Commission (“FERC”) initiatives explore the potential for consolidating the management and operations of the U.S. electric power grid into four major Regional Transmission Organizations (“RTOs”), plus Texas and possibly Florida, each controlling the portion of the power grid located within their respective geographic regions. While this consolidation might arguably be essential to the promotion of more efficient power markets, it will need to be implemented in a thoughtful manner that does not jeopardize national security. As FERC pointed out in Order 2000 “The Commission proposed, however, that an RTO would not be required to be a single control area because of concerns over potentially high costs and technical limitations. Instead those proposing an RTO would be given flexibility in determining the best division of functions between the RTO and any providers of other control area functions if there are no other grid operators in its region.”

Although not advocating any particular structural design, Garwood suggests that plausible, options exist that can accomplish the goal of creating efficient power markets without jeopardizing the security of the electric power system. These options include, but are not necessarily limited to:

1. Maintaining current levels of control at utility control centers in compliance with FERC order 889.

2. Maintaining current levels of control at existing control centers, but requiring that the operation of such centers be carried out by Independent Transmission Companies (ITCs) that have satisfied the FERC’s “independence” criteria.

3. Maintaining current levels of control at utility control centers, but requiring that the operation of such centers be carried out by utilities that have satisfied the FERC’s “independence” criteria specified in Order No. 2000 by having divested themselves of generation and ceasing the marketing of electricity (i.e., wires-only utilities).

4. Maintaining current ownership of control centers, but contract with an independent third-party operator, other than an RTO, to assume physical operation and maintenance of said facilities while under the control of an RTO.

5. Requiring that the RTO assume ownership and operation of utility control centers that could include the transfer of these assets to the RTO with appropriate compensation and transferring the utility personnel to the RTO, as employees of the RTO.

6. Building control centers owned and operated by the RTO in sufficient numbers with appropriate levels of redundancy and geographic separation while still maintaining overlapping capabilities.

Garwood states, “Whatever the wisdom of consolidating the management and/or rules of the transmission system into a handful of regional organizations, the resulting entities should ensure that the positive features of centralization have been balanced against the possible increase in security risks caused by centralization. FERC recognizes this; now NERC (North American Electric Reliability Council) and RTOs should also. This will enhance the likelihood that sufficient dispersion of grid operations with redundant, geographically separated, and overlapping capabilities is maintained; and reduce the risk that operation of the transmission grid is not vulnerable to being disabled by extraordinary, catastrophic events, such as the recent terrorist attacks.”

For more information on this topic, please see the complete text of Garwood’s article on Rudden’s web site at www.rjrudden.com.

R.J. Rudden Associates, Inc. is among the world’s premier strategic, economic and management consulting firms specializing in energy matters. Throughout its history, Rudden has assisted clients in such mission-critical areas as: economic and financial analysis; strategic, management and marketing services; industry restructuring support; litigation and regulatory support; technical analysis; and implementation support.

Serving more than 300 clients worldwide, Rudden’s energy industry professionals include experienced energy company senior executives, energy economists, senior policy experts and regulatory officials, engineers, renowned futurists, and internationally respected subject matter experts.

Many are widely published and each is highly regarded for his or her unique insight and targeted approach to problem solving. Rudden’s clients encompass the full range of the energy value chain and cut across all market sectors, including energy producers, the financial community, the legal and regulatory community, new business ventures, and large energy consumers.

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at Jennifer.Runyon@ClarionEvents.com.

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