Source: Department of Energy
Today the business media highlight how the Internet enables employees to work from home. Land use planners predict that telecommuting will alter the transportation patterns for work, while investors buying Internet-related stocks still predict that "dot.com" companies will revamp the distribution of goods and services.
A century earlier, the same apocalyptic predictions could have been made about the impact of electricity on cities. Manufacturing was decentralized away from the urban core. Finance, government, and retail operations replaced manufacturing as downtowns became white-collar centers. At the same time, the automobile enabled workers to commute to jobs from much further distances, and to live far away from rail/trolley lines too. In Northern Virginia, the population boom from government workers filled up Alexandria, Arlington, and the Fairfax counties as Federal agencies swelled to deal with World War I, the Depression, World War II, and then the Cold War.
Getting electrical power to the homes of these new residents required not only new generating capabilities, but also new distribution systems. The state government ended up regulating power companies, eliminating competition along with unsightly duplication of power poles. The Federal government financed delivery of power to rural areas through the Rural Electrification Administration (REA), after "the 1930 Census showed that only one tenth of American farms had central station service" - but it was a controversial decision.
The political arguments in favor of the rural electrification movement highlighted the benefits of Federal support (i.e. tax dollars primarily from urban areas) for bringing electricity to barns for electrical lights and milking machines, and to rural homes for refrigerators and washing machines. However, of equal importance was the desire to stimulate economic development in the rural countryside, to support high-paying industrial jobs in the rural communities. Therefore, it should not be surprising that the National Rural Electric Cooperative Association is a member of a group called the "National Endangered Species Act Reform Coalition," seeking to weaken the restrictions of the environmental protections provided by that legislation. (And would it surprise you to learn that the organization is located in Northern Virginia, near the national capital?)
Today, electricity in Virginia is sold to commercial, industrial, and residential consumers (plus the Federal government's military installations) by investor-owned companies, publicly owned utilities, and cooperatives.
Dominion (the company formerly known as "Virginia Power" - it keeps merging and subdividing into new corporate components, splitting and lumping the power generation and distribution units to adapt to changing objectives and circumstances) generated most of the electricity to supply its service area using power plants located within the region. According to the National Energy Information Administration, there is only enough transmission capacity to import 3-4,000 MW into a region with a peak demand of 15,000 MW. Nationwide, there is a surplus of electrical generation capacity, due in part to energy efficiency measures to reduce demand - but inadequate power lines to distribute the electricity from areas with a surplus to areas with a demand for lower-cost power.
For decades, the State Corporation Commission (SCC), the successor to the Board of Public Works and the state railroad commission, has controlled the utility rates charged to customers. As part of the approval process, the SCC required the utility companies to build enough generating plants to ensure customers would have a reliable supply of power. In exchange, the companies got exclusive rights to sell electricity in certain portions of Virginia, along with rates that were set high enough to ensure a steady dividend was paid to the company stockholders.
The investment decisions by the private-sector companies were also affected by the government. In the 1980's, the Federal Government and the SCC encouraged purchase of power from non-standard sources rather than construction of new power plants. The "avoided costs" of not having to borrow money and build new facilities were incorporated into the contracts. By 1999, 20% of the electricity available to Virginia Power (now Dominion Resources) was from contracts with non-utility generators such as solid waste incinerators and pulp mills.
This approach appeared to minimize waste ("why put wood chips in a landfill if you can burn them for power?") and reduce the costs to rate-payers. However, it locked the utility company into long-term contracts for high-cost electricity. Proposals for deregulation threaten to change the rules of the utilities game.
According to the Energy Information Administration,
VEPCO was by far the largest seller of electricity in Virginia in 1999:
| Utility | 1999 Sales (1,000kwh) |
|---|---|
| Virginia Electric & Power Co. | 62,650,370 |
| Appalachian Power Co. | 14,874,789 |
| Potomac Edison Co. | 2,404,523 |
| Northern Virginia Elec Coop. | 2,067,082 |
| Rappahannock Electric Coop. | 1,957,268 |
| City of Danville | 921,912 |
| Kentucky Utilities Co. | 825,948 |
| City of Harrisonburg | 645,872 |
| Southside Electric Coop Inc. | 632,740 |
| Shenandoah Valley Elec Coop. | 618,084 |
| Bristol Utilities Board | 584,860 |
| City of Manassas | 545,084 |
| Mecklenburg Electric Coop Inc. | 484,955 |
| Central Virginia Electric Coop. | 480,671 |
| City of Radford | 391,423 |
| City of Salem | 378,828 |
| Delmarva Power & Light Co. | 348,651 |
| Virginia Tech Electric Service | 266,408 |
| City of Bedford | 228,028 |
| Prince George Electric Coop. | 213,635 |
| City of Martinsville | 192,749 |
| Northern Neck Elec Coop Inc. | 190,111 |
| A & N Electric Coop. | 186,807 |
| BARC Electric Coop Inc. | 147,907 |
| Community Electric Coop. | 145,882 |
| Town of Front Royal | 142,042 |
| City of Franklin | 126,335 |
| Powell Valley Electric Coop. | 110,137 |
| Craig-Botetourt Electric Coop. | 65,223 |
| Town of Culpeper | 62,834 |
| Town of Richlands | 62,784 |
| Town of Blackstone | 42,062 |
| Town of Elkton | 16,485 |
| Town of Wakefield | 10,814 |
| Tennessee Valley Authority | 9,165 |
In the short run, some utilities could be hurt economically - and the demand for "protection" will cause political battles than only a few engineers and lawyers will really understand. In such circumstances, the political landscape could be filled with charges of unfair influence and a search for scapegoats, perhaps comparable to the savings and loan crisis of the 1980's if the utility advertising fails to explain the changes in procedures clearly enough.
How could Virginia's utilities be affected by deregulation?
Virginia Power was required by the SCC to have local capacity, and rates were set high enough to recoup the investment in new facilities or contracts to buy power. With deregulation, the company may lose the exclusive right to sell electricity at fixed rates in Virginia and thus recoup its mandated costs over the planned life of the investment. The amount of money at risk is known as "stranded costs" -referring to investments that might be stranded by a sea change in public policy. A major political debate is underway now to define equitable ways to spread stranded costs to customers and/or utility investors (stockholders) over time.
If the cooperatives or expensive-to-service customers at the end of the powerline see cost increases, watch out for a reshaping of the stereotypical rural, conservative politicians. Rather than opposing government agencies which interfering with the free market, such politicians could become activists for government intervention. Voters are more likely to request assistance from the elected representative, rather than the "invisible hand" of market forces. It may even become a partisan rather than a regional issue, if one party decides to become the champion of protecting "the little guy" by redistributing wealth from areas of high population concentrations to the unsettled areas of Virginia. [Hmmm... does this sound like the debate over making property taxes for school support more equitable, or for changing the formula for distributing road construction funding?]
Many conservative, risk-averse investors purchased Dominion Resources stock for their portfolios back when the dividend was essentially guaranteed via the rates set by the SCC. However, the political decision to deregulate the industry could affect the volatility of utility company stocks (as well as require consumers to choose an energy provider, comparable to choosing long distance phone companies). In the process, the geography of power generation and distribution, and even some of the complex technical constraints that affect electricity distribution ("real" vs. "reactive" power), will become common topics of conversation.
Electricity can be moved from the generating source, through transmission lines, to the customer. There are complex electrical engineering factors that affect the management of the grid of power lines that connect suppliers with customers. In bulk power transmission, the energy transmitted from the "sources" to the "sinks" must be balanced.
With deregulation, the number of suppliers, marketers, and purchasers of power is far greater, and the accounting for power transmissions is far more complex. When a power plant goes off-line or a solar flare disrupts transmissions, the grid's ability to move power from source to sink at the correct voltage is affected. In July, 1999, the PJM Interconnection (P=Pennsylvania - J=New Jersey - M=Maryland) had to reduce voltage 5% before it reached peak load on July 6, 1999.
Electricity delivery is not as straightforward as the delivery of mail by the Postal Service or packages by FedExpress, and training is not simple. The transmission lines (the wires on the tall towers you see crossing the countryside) transport electricity. As population grows and people use more electrical appliances in the home, demand for electricity is rising. New "electricity highways" are constructed by adding new wires to existing towers, or occasionally constructing a new set of towers. Such construction can be politically difficult; few people consider transmission lines to be esthetic, and some question the safety of living near them.
Virginia Power purchased the rights-of-way of the failing Washington and Old Dominion Railroad in the early 1960's, to acquire a corridor for a new transmission line to supply the growing Northern Virginia region. Only after some contentious discussions was the route also made into a bike trail for recreational use.
The controversial AEP proposal to build a 765 kilovolt power line from its coal-fired power plant in Wyoming, West Virginia to Cloverdale, Virginia illustrates how an understanding of physical and cultural geography can help shape a public policy debate:
Electricity is bought and sold for firm delivery under long-term contracts and on a "spot" market to meet short-term demand. When Virginia Power acquires electricity from the New York Power Pool, the capacity to transmit the energy through Pennsylvania and Maryland transmission lines must be reserved along with the power itself. Since PJM Interconnection is a multi-state operation, the procedures and prices are affected by a Federal Energy Regulatory Commission (FERC) tariffs. Arrangements for delivery are handled in part through an online system, OASIS.
Virginia is included in two regions of the North American Electricity Reliability Council - Southeastern Electric Reliability Council (SERC) and the East Central Area Reliability Council (ECAR).
Note than production of electricity is highly centralized. The economies of scale lead to large hydroelectric dams and coal-fired power plants and nuclear reactors, rather than numerous small ones. The Public Utility Regulatory Policies Act of 1978 ("PURPA") encouraged a shift to decentralized production of electricity (and steam). This was a side effect - primary emphasis of the legislation was to stimulate production from non-traditional, renewable sources. The ongoing deregulation of electricity is likely increase the number of electricity producers, spurring co-generation at many manufacturing facilities. From a geographical perspective, the current map of sites in Virginia creating electricity for sale is likely to have many more dots by 2010...
Traditionally you may consider it wiser to put a few eggs in many different baskets rather all eggs in one basket. According to that approach, creation of more power plants in Virginia should increase our energy security. Initially, every Virginia manufacturing facility created its own independent power from wood or water. If a water wheel or dam broke for one grist mill, others could continue operating.
Urban centers started to create electricity in a similar fashion. When Richmond established the first hydroelectric plant to power street cars, or when Manassas created its own hydroelectric plant on Bull Run, the cities built stand-alone systems unconnected to any other sources of power. If ice clogged the intakes in January, Manassas customers froze in the dark for a few days - or relied upon their wood stoves and kerosene lamps. When these and other plants were connected by a grid of transmission lines, however, it became less likely that failure/sabotage at one large facility could blackout a significant region of Virginia.
Still, the major utilities rely upon just a few major generating sources to supply nearly 7 million Virginian customers. A handful of nuclear and coal plants supply a steady base load of power 24 hours/day, while more-flexible natural gas and hydro plants can generate peaks of power for the surges in demand on weekday mornings and early evenings. The small PURPA-stimulated facilities, such as the waste-to-energy plant (incinerator) at the Lorton landfill in Fairfax County, are less-stable suppliers of power compared to the large centralized plants such as the Clover coal-fired plant in Halifax County.
The energy security provided through PURPA comes more from reducing the demand for imported oil than from adding more eggs to the basket. If you added up all the small generators, you'd be hard-pressed to replace Surry 1 and 2... and even with the flexibility of the power grid, all Virginians have experienced many temporary power failures.
Were it not for a sophisticated transmission system able to transfer power from suppliers are far away as Ontario and to adapt to drops/surges as plants change their production, we would not be able to assume the lights will come on when we throw the switch. The design of the Internet provides an interesting comparison.
The initial ARPANET design was intended to provide "survivability" for Department of Defense communications, even if major communications centers were obliterated by a nuclear attack. Instead on relying upon a few centralized switching centers, the Internet was designed to rely upon alternative routes in an interconnected grid of telecommunications networks. Of course, the costs of building transmission lines for electricity are far greater than the costs for transmission on Internet Protocol packets - and unsightly too. Don't look for new power lines to be constructed as fast as you see microwave towers being erected or fiber optic lines being buried underground, especially in Northern Virginia.
One other comparison illutrates the geography of electricity in Virginia - the highway network throughout the state. It was designed intially to get crops from farms to market, and is now used to get manufactured goods to market (i.e., trucks on I-81 and the Woodrow Wilson Bridge) and employees from home to work. In hilly areas such as Buchanan County, a blockage of one road will dramatically interfere with local transportation. In other areas, such as Shenandoah County, there are many alternative roads that will allow drivers to reach their destination without waiting for the blockage to be cleared.
Public investment in mass transit increases dependence upon centralized systems, reducing flexibility to adapt to changing situations. Highway bridges and tunnels in particular are weak points, comparable to the interties connecting different electrical grids. Radio stations provide highway traffic reports "on the eights" or "every ten minutes," indicate the dependence on just a few routes for navigating the urban centers in Virginia. In places such as Arlington County and Hampton, local roads provide multiple choices for local traffic... but the limited backbone of Interstate and arterial highways is highly vulnerable to disruption. One accident and poof: 15,000 people will be late to work. There are now Internet traffic reports. Think the day will come when you are accustomed to hearing an electricity transmission report on the radio?
Bottom line: the story to watch re: Virginia electricity is not the easy-to-grasp changes in the locations of the generating plants, but instead the hard-to-see changes in the electrical distribution system. Deregulation of production, together with the inflexibility of the grid, will lead to public policy debates on ensuring fair access to the grid.
The Internet may be the media darling-du-jour, but you can be the first on your block to understand that electricity generation is the story-in-the-wings. Henrico County and other communities debated imposing open access requirements to Internet Service Providers (ISP's) before renewing licenses for cable TV networks in 1999. The politicians considered mandating that the cable networks permit customers (i. e., voters...) to choose ISP's not associated with the cable company. Until AOL bought the Time Warner cable network, that Virginia company led the charge for open access. Onced Time Warner owned a critical mass of both generation facilities for Internet content and distribution channels via cable, the company changed its emphasis. Watch for comparable shifts in emphasis as ownership of utilities change in the near future...
Virginia will have to build its share, 1-2 new plants each year. Maybe Internet-related activities are not consuming 10% of the current supply, but obviously Virginia has a hefty percentage of the "new economy." Visit a data center, and you will see rows of diesel backup generators, each the size of a tractor trailer and able to generate 2MW apiece. In Gainesville, west of Manassas, a data center "farm" is being constructed with its own power plant fueled by natural gas.
There are few - or no - remaining sites suitable for generating electricity by hydropower. The enviromental tradeoffs are too great, at least as we view them today. Windpower is still marginally utilized in the state, compared to pre-Depression days when windmills were common on farms - but wind turbines are "bird Cuisinarts" and Virginia is on the Atlantic flyway. Co-generation associated with chip mills or paper mills is a source of power as well as way to reduce the wood waste, but there's far too little power available from that source to meet a 45% increase in demand.
Coal is plentiful in Virginia. If the Unites States signed the Kyoto Protocol, we'd have to reduce carbon dioxide emissions substantially to reduce global warming. However, the Bush Administration made clear in its second month that carbon dioxide is not likely to be added to the Clean Air Act restrictions on sulfur dioxide, nitrogen dioxide, and mercury. So coal is a likely candidate for new power plants to supply energy in Virginia... but at the moment, natural gas is king.
It's cheap, though prices will rise after the California energy crisis of 2001. Natural gas is a domestic fuel - 85% is produced within the United States, and new drilling in the deep waters of the Gulf of Mexico will provide more, so it's not as vulnerable to political pressures by OPEC. Transmission lines run from Texas and Louisiana through Virginia's Piedmont to New York, so new power plants east of the Blue Ridge can be supplied easily with natural gas.
The sleeper fuel is nuclear. The world is awash in cheap uranium while nuclear weapons are being decommissioned. New nuclear plants might be welcomed on the Eastern Shore, downwind (most of the time...) from population centers. The downsides are obvious: there's no designated area to store the radioactive waste, and public fears of nuclear power are intense. Nuclear energy is never going to be "too cheap to meter" as promised in the 1950's, but Virginia has two nuclear power plants and their four nuclear reactors supply some of the cheapest power in Virginia now.