Electricity Restructuring

The August 14, 2003, electricity blackout--the largest in the nation's history--affected millions of people across eight northeastern and midwestern states as well as areas in Canada. The blackout intensified concerns about the overall status and security of the electricity industry at a time when the industry is undergoing major changes and Americans have a heightened awareness of threats to security. Because of these widespread concerns and the broad institutional interest of the Congress, we (1) highlighted information about the known causes and effects of the blackout, (2) summarized themes from prior GAO reports on electricity and security matters that provide a context for understanding the blackout, and (3) identified some of the potential options for resolving problems associated with these electricity and security matters.

While the root cause of the blackout has not yet been conclusively established, a recent DOE report describes a sequence of events that culminated with the outage. A series of power plants and transmission lines went offline beginning at about noon eastern daylight time because of instability in the transmission system in three states. The loss of these plants and transmission lines led to greater instability in the regional power transmission system, which--4 hours later--resulted in a rapid cascade of additional plant and transmission line outages and widespread power outages. The blackout affected as many as 50 million customers in the United States and Canada, as well as a wide range of vital services and commerce. Air and ground transportation systems shut down, trapping people far from home; drinking water systems and sewage processing plants stopped operating; manufacturing was disrupted; and some emergency communications systems stopped functioning. The lost productivity and revenue have been estimated in the billions of dollars. A joint U. S.-Canadian taskforce is seeking to identify the root cause of the failures and plans to issue an interim report in November 2003. Over the past several years, our work on the electricity sector has resulted in numerous findings, conclusions, observations, and recommendations. Based on this prior work, we highlight three themes on electricity and security matters in our briefing and lay out some of the potential options to consider in addressing problems in these areas. Electricity markets are developing, but significant challenges remain. Our work has shown that while the electricity sector is in transition to competitive markets, the full benefits of these markets will take time and effort to achieve. Oversight of markets and reliability needs more attention. The ongoing transition to competitive markets, or "restructuring" of electricity markets, has dramatically changed how the Federal Energy Regulatory Commission (FERC) needs to oversee these markets and the information it needs to do so. Security for critical infrastructure is of growing importance. Our work has shown that a reassessment of the security of the nation's physical infrastructure as well as that of related information technology and control systems should be undertaken.