article about enron - wsj 4 / 17 / 01 -
april 17 , 2001 economy electricity facilities sprout near tiny tennessee town by john j . fialka staff reporter of the wall street journal nutbush , tenn . - - this town of about 100 people hasn ' t seen anything quite this electrifying since the 1950 s when a local teenager , annie mae bullock , left town and became tina turner , the queen of rock ' n ' roll . power plants are sprouting in the flat , rich cotton fields nearby . one is under construction ; another is about to start . bulldozers are grooming a site for a third . " we think it ' s great , " says alvin williams , owner of the nutbush grocery and deli , as he prepares for the surge of construction workers who come in for lunch . while this may seem promising at a time of growing energy shortages , the new plants are part of a power clash that presents the bush administration and federal and state regulators with one of their knottiest problems : who controls the nation ' s power grid ? on one side is a new breed of freewheeling energy dealers called merchant traders , spurred by deregulation to generate and trade electricity . led here by enron corp . , they build small gas - fired generating plants , but most don ' t construct their own power lines . instead , they hook up the plants to existing lines and sell electricity wholesale over long distances when prices peak during the summer . thus , many of their plants are called " peakers . " on the other side are old - line utilities , represented here by the federally owned tennessee valley authority . they operate the power lines and warn that the system could become overloaded , leading to blackouts from the imbalance . near nutbush here in tennessee ' s southwest corner , natural - gas pipelines run from the gulf coast and intersect with some of the tva ' s 17 , 000 miles of transmission lines , which are spread over seven southern states . that is what is making nutbush boom : it is an attractive place to connect to the grid . by 2003 , at least 13 new merchant plants altogether will be hooked up across the tva ' s system . there will be dozens more on neighboring systems that will also use tva lines , says w . terry boston , a tva executive vice president . this year , tva expects 300 , 000 requests for wholesale power deals on its system , up from 250 , 000 last year and just 25 , 000 in 1996 . mr . boston foresees a congestion problem that will make it more difficult for the utility to maintain its record of 99 % reliability . " this summer is going to be interesting , " he says . combat started here in the spring of 1999 , when an enron plant at nearby brownsville began bombarding tva with about 800 requests for summer transmission service , up from 33 the tva had received from merchant plants the year before . some were huge , elaborate trades involving brokered electricity from other sources that enron wanted to ship across the tva system . kevin presto , an enron vice president , recalled : the tva " pretty much fought us the whole way , even though they needed the megawatts . " that june , tva pulled the plug , telling enron that from then on , its wheeling and dealing would be confined to the amount of electricity produced in enron plants . enron claimed foul and appealed to the north american electric reliability council , or nerc , , a voluntary organization of utilities and electricity consumers . along with the federal energy regulatory commission and state regulators , nerc functions as the traffic cop for north america ' s power grid . enron also sued the tva and the dispute " raised a number of issues that we are trying to put our fingers on , " says don benjamin , nerc ' s director of operations . one upshot is that it is busy rewriting the rules for how the national grid is controlled . the bush administration ' s energy task force and congress are also looking at the control issue and ways to expand the grid ' s capacity . so far , they have found no easy or inexpensive answers . the grid , with its dense webs surrounding major cities and few links in between , resembles a u . s . highway map from the 1930 s before the interstate system was built . and it is governed by rules that were negotiated by utilities at about that time , as they began to interconnect their systems with their neighbors ' . big utilities became " control areas " that perform the moment - to - moment adjustments that keep lines from overloading and equipment from melting down . with electricity , supply must always match demand . but lately , operators of merchant plants , such as enron , have also qualified to become control areas . regulators have ordered utilities to give merchant power plants open access to the grid , though the utilities sometimes curtail access for " reliability " reasons . " this was a very good system , " sighs thomas overbye , an engineering professor at the university of illinois . but while merchant plants have more access to the grid , he notes , they have little incentive to build more power lines . " when you restructure that way , " asserts mr . overbye . " you ' re going to overload the system , and that ' s exactly what ' s happening . " nerc ' s mr . benjamin worries that control will get harder this summer . " we ' ve got to be able to look at this and see what effects these deals are having on the whole system , " he says . some ad hoc curtailment of wholesale deals and service to customers may be necessary to protect the grid , but the result will be expensive , he notes . " it means that merchants won ' t make money on that deal , and that the customer they sold power to will have to buy it from somebody else . " in the summer of 1999 there were such 70 curtailments ; last summer there were 180 . lynn church , president of the electric power supply association , which represents 40 merchant power companies and electricity traders , suspects that decisions taken by big utilities for " reliability " reasons are sometimes used to block legitimate competition from her members . to prevent this , her group wants more federal control over the grid . " we ' re seeing lots of discrimination . " the tva ' s mr . boston counters that his system can ' t take more " surprises , " such as the one on aug . 19 , 1999 , when a series of wholesale trades brought the tva ' s part of the grid to the brink of collapse from the overload . this year , enron settled its fight with the tva with a secret out - of - court settlement . enron says it is also in the process of selling the plant near here and two others it had hooked to the tva system to other merchant power producers . but it is still waging war over who controls the grid . in a separate case now before the u . s . supreme court , enron argues that ferc has the power to open more of the grid ' s capacity to merchant power plants . utility commissioners from several states argue it doesn ' t . while this is going on , ferc is pondering how to cut back the grid ' s proliferating number of control areas . right now there are about 150 . according to one ferc expert , who asked not to be identified , to avoid " complications " there should be around 14 . meanwhile , officials in tina turner ' s home turf still want the power plant construction to keep on rocking . " there ' s going to be others , " predicts john sharpe , the executive of haywood county , who has been out recruiting more power plants to keep the local economic boost going . " i ' m working my pants off to try and make that happen . " write to john j . fialka at john . fialka @ wsj . com
article about enron - wsj 4 / 17 / 01
-
april 17 , 2001 economy electricity facilities sprout near tiny tennessee town by john j . fialka staff reporter of the wall street journal nutbush , tenn . - - this town of about 100 people hasn ' t seen anything quite this electrifying since the 1950 s when a local teenager , annie mae bullock , left town and became tina turner , the queen of rock ' n ' roll . power plants are sprouting in the flat , rich cotton fields nearby . one is under construction ; another is about to start . bulldozers are grooming a site for a third . " we think it ' s great , " says alvin williams , owner of the nutbush grocery and deli , as he prepares for the surge of construction workers who come in for lunch . while this may seem promising at a time of growing energy shortages , the new plants are part of a power clash that presents the bush administration and federal and state regulators with one of their knottiest problems : who controls the nation ' s power grid ? on one side is a new breed of freewheeling energy dealers called merchant traders , spurred by deregulation to generate and trade electricity . led here by enron corp . , they build small gas - fired generating plants , but most don ' t construct their own power lines . instead , they hook up the plants to existing lines and sell electricity wholesale over long distances when prices peak during the summer . thus , many of their plants are called " peakers . " on the other side are old - line utilities , represented here by the federally owned tennessee valley authority . they operate the power lines and warn that the system could become overloaded , leading to blackouts from the imbalance . near nutbush here in tennessee ' s southwest corner , natural - gas pipelines run from the gulf coast and intersect with some of the tva ' s 17 , 000 miles of transmission lines , which are spread over seven southern states . that is what is making nutbush boom : it is an attractive place to connect to the grid . by 2003 , at least 13 new merchant plants altogether will be hooked up across the tva ' s system . there will be dozens more on neighboring systems that will also use tva lines , says w . terry boston , a tva executive vice president . this year , tva expects 300 , 000 requests for wholesale power deals on its system , up from 250 , 000 last year and just 25 , 000 in 1996 . mr . boston foresees a congestion problem that will make it more difficult for the utility to maintain its record of 99 % reliability . " this summer is going to be interesting , " he says . combat started here in the spring of 1999 , when an enron plant at nearby brownsville began bombarding tva with about 800 requests for summer transmission service , up from 33 the tva had received from merchant plants the year before . some were huge , elaborate trades involving brokered electricity from other sources that enron wanted to ship across the tva system . kevin presto , an enron vice president , recalled : the tva " pretty much fought us the whole way , even though they needed the megawatts . " that june , tva pulled the plug , telling enron that from then on , its wheeling and dealing would be confined to the amount of electricity produced in enron plants . enron claimed foul and appealed to the north american electric reliability council , or nerc , , a voluntary organization of utilities and electricity consumers . along with the federal energy regulatory commission and state regulators , nerc functions as the traffic cop for north america ' s power grid . enron also sued the tva and the dispute " raised a number of issues that we are trying to put our fingers on , " says don benjamin , nerc ' s director of operations . one upshot is that it is busy rewriting the rules for how the national grid is controlled . the bush administration ' s energy task force and congress are also looking at the control issue and ways to expand the grid ' s capacity . so far , they have found no easy or inexpensive answers . the grid , with its dense webs surrounding major cities and few links in between , resembles a u . s . highway map from the 1930 s before the interstate system was built . and it is governed by rules that were negotiated by utilities at about that time , as they began to interconnect their systems with their neighbors ' . big utilities became " control areas " that perform the moment - to - moment adjustments that keep lines from overloading and equipment from melting down . with electricity , supply must always match demand . but lately , operators of merchant plants , such as enron , have also qualified to become control areas . regulators have ordered utilities to give merchant power plants open access to the grid , though the utilities sometimes curtail access for " reliability " reasons . " this was a very good system , " sighs thomas overbye , an engineering professor at the university of illinois . but while merchant plants have more access to the grid , he notes , they have little incentive to build more power lines . " when you restructure that way , " asserts mr . overbye . " you ' re going to overload the system , and that ' s exactly what ' s happening . " nerc ' s mr . benjamin worries that control will get harder this summer . " we ' ve got to be able to look at this and see what effects these deals are having on the whole system , " he says . some ad hoc curtailment of wholesale deals and service to customers may be necessary to protect the grid , but the result will be expensive , he notes . " it means that merchants won ' t make money on that deal , and that the customer they sold power to will have to buy it from somebody else . " in the summer of 1999 there were such 70 curtailments ; last summer there were 180 . lynn church , president of the electric power supply association , which represents 40 merchant power companies and electricity traders , suspects that decisions taken by big utilities for " reliability " reasons are sometimes used to block legitimate competition from her members . to prevent this , her group wants more federal control over the grid . " we ' re seeing lots of discrimination . " the tva ' s mr . boston counters that his system can ' t take more " surprises , " such as the one on aug . 19 , 1999 , when a series of wholesale trades brought the tva ' s part of the grid to the brink of collapse from the overload . this year , enron settled its fight with the tva with a secret out - of - court settlement . enron says it is also in the process of selling the plant near here and two others it had hooked to the tva system to other merchant power producers . but it is still waging war over who controls the grid . in a separate case now before the u . s . supreme court , enron argues that ferc has the power to open more of the grid ' s capacity to merchant power plants . utility commissioners from several states argue it doesn ' t . while this is going on , ferc is pondering how to cut back the grid ' s proliferating number of control areas . right now there are about 150 . according to one ferc expert , who asked not to be identified , to avoid " complications " there should be around 14 . meanwhile , officials in tina turner ' s home turf still want the power plant construction to keep on rocking . " there ' s going to be others , " predicts john sharpe , the executive of haywood county , who has been out recruiting more power plants to keep the local economic boost going . " i ' m working my pants off to try and make that happen . " write to john j . fialka at john . fialka @ wsj . com