1752: Benjamin Franklin attaches a metal wire and key to a kite and flies the contraption during a thunderstorm in order to successfully prove that lightning is a form of electricity.
1879: Thomas Edison successfully demonstrates the electric light bulb and generator. Newspapers declare the era of electricity has begun.
1882: Edison launches the first iteration of the modern electricity industry with the Pearl Street station, the first modern electricity generating station. The utility serves 59 customers.
1896: Development begins on the Niagara Falls hydroelectric project, a massive plant designed to transmit power to Buffalo, NY, more than 20 miles away. The era of central generation and long-distance transmission begins.
1898: Power entrepreneurs, notably Samuel Insull, build economies of scale, swallowing up smaller utilities in the process. Some reformers begin to question the effect consolidation will have on consumers. In a speech before the National Electric Light Association, Insull suggests that the utility industry is a natural monopoly, meaning that it is an industry in which having a sole provider serves the common good. Under this model, Insull suggests that utilities be granted sole rights to provide power to certain geographic regions and in return submit to government regulation and rate setting.
1907: Wisconsin enacts the first law designed to regulate power companies. The law creates a commission to set rates for private utilities. Other states quickly follow. Within nine years, 30 states have some form of utility regulation.
1934: The Public Utility Holding Company Act (PUHCA) of 1934 enshrines in statute the state regulated monopoly structure that has dominated electricity supply service ever since. This act is a direct result of the business model that leveraged economies of scale and demand growth to keep power rates reasonable yet profitable. PUHCA establishes an absolute obligation to serve all consumers as quid-pro-quo for a guaranteed rate of return to each utility monopoly. This model works well for consumers until 1967.
1940s and 1950s: These are the boom years of the electric power industry. Economies of scale make electric power affordable and a host of new household appliances make it indispensable. Utilities feed the demand with heavy advertising and regulatory policy encourages growth of the industry. As a result, electricity use skyrockets, doubling every 10 years after World War II.
Late 1950s: Until now, the electric power industry has become increasingly efficient in fuel consumption. That improvement stops in the late 1950s. Then, as now, two-thirds of the fuel used to generate electricity is lost. Most of the remaining waste, known as “line loss” happens as a result of transmitting power out over long distances.
1953: President Dwight D. Eisenhower makes his “Atoms for Peace” speech before the United Nations, advocating for the peaceful use of nuclear power.
1954: Congress approves the Atomic Energy Act, which encourages private corporations to build and own nuclear reactors. The government repeatedly sweetens the pot to encourage reluctant corporations to get into the nuclear game. A combination of subsidies and protections finally persuades them to start building nuclear power plants.
1960: The average American home has at least 12 electrical appliances.
1962: Publication of Rachel Carson’s “Silent Spring” forces Americans to think about the environmental and health consequences of modern industrial society, including utilities.
1964: The average power plant in operation today was built in this year (using far-from-perfect technology from previous decades).
1965: In November, a slight surge in demand causes a transmission line in the Northeast to redirect its power, leaving the load with no safe path. Within less than 12 minutes, the system crashes, leaving consumers in eight states and one Canadian province without power for nearly 13 hours.
1967: While less dramatic than the blackout, this year marks a turning point in the economics of utilities. Until now, utilities have been able to build new power plants essentially for free because the new plants are so much more efficient than the old ones. But then the technology peaks. From 1967 on, the existing generation models are as efficient as they could ever get and adding capacity would cost the utilities money — costs that would be passed on to consumers.
1968: In response to the 1965 blackout, the utilities band together to create a self-regulatory agency. The North American Electric Reliability Council (NERC) sets voluntary standards for reliable planning and operation of the electric power system. This is the only reliability regulatory body in place until 2005
1970: Congress enacts the Clean Air Act, which requires utilities to invest in costly anti-pollution technology.
1973: The U.S. Supreme Court rules in favor of four small communities who sued a private utility company in the late 1960s to force it to allow low-cost electricity from a federal hydroelectric project to be sent over its distribution lines. This ruling puts a small crack in the monopoly system, slightly opening the door to competition.
1973: The Organization of Petroleum Exporting Countries (OPEC) launches an oil embargo to protest U.S. Middle East policy. This leads to a dramatic increase in not only the cost of oil but also of electricity-generating fuels, including coal. Higher costs and a generally weak economy encourage consumers to conserve energy and reduce the growth of electricity sales for the first time since World War II.
1974: The utilities continue building, labor costs associated with construction rise and utilities begin to face up to harsh economic realities. Reluctant to face the political — and investor — fallout associated with higher rates, many utilities simply stop building capacity or upgrading existing technology.
1977: A summer blackout, caused by a small malfunction in the system, affects 9 million New Yorkers and leads to mass property damage as looters and rioters tear through the blackened streets. This outage finally convinces utility companies to shift money from building new power plants to upgrading the existing distribution system. The capital expenditures are passed along to consumers in the form of rate hikes, which lead to increasing public criticism of the utility monopolies.
1978: Skyrocketing oil prices lead President Jimmy Carter to call for a national energy plan. The Carter plan eventually becomes the Public Utility Regulatory Policies Act ( PURPA). A small section of PURPA, added in at the legislative last minute, creates incentives to build and operate small, more fuel-efficient electricity generators and creates limited market competition. Utilities sue to stop the law from going into effect.
1979: The nation’s first highly publicized and potentially serious nuclear accident occurs at Three Mile Island, about three miles from the Pennsylvania capital, Harrisburg. Americans turn against nuclear power and demand stricter and more expensive regulation. Meanwhile, the cost of building many of these reactors turn out to be far greater than anticipated.
1983: The U.S. Supreme Court upholds PURPA. The decision states that it is in the national interest to “provide a significant incentive to the development of cogeneration and small power product, and that ratepayers and the nation as a whole would benefit from the decreased reliance on scarce fossil fuels and the more efficient use of energy.”
1992: In less than a decade, PURPA had already led to some significant benefits. The capacity for cogeneration has soared dramatically, from 10,500 megawatts in 1979 to 40,700 in 1992. During the same period, this very limited competition led to an approximately 30 percent drop in average electricity rates, saving Americans $50 billion a year.
1992: In response to the crisis that led to the Gulf War, Congress enacts legislation intended to reduce our dependence on foreign oil. The Energy Policy Act further expands wholesale competition by broadening the rules about who can enter the power generation marketplace. The law does not, however, allow for “retail wheeling” — the delivery of electricity by non-utilities directly from generator to consumer.
1996 and 1999: Let competition begin. The Federal Energy Regulatory Commission (FERC) issues rules implementing the 1992 law. These rules, combined with a follow-up set in 1999, are a significant step toward opening access to the grid. For the first time, utilities were required to send power from other generators over their lines at the same price it would cost to send their own power. In the utilities favor, FERC requires that consumers pay for the utilities “stranded costs” — assets such as massive generators that would become less valuable or worthless in a competitive market. The mechanics of paying for stranded costs is left up to the states.
2000: Wholesale electricity trading is going full force. While approximately 100 million kilowatt-hours were traded over power lines in 1996, by 2000 that figure has soared to just less than 4,500 million.
2003: The largest blackout in North American history leaves nearly 50 million people without power in the northeastern United States and eastern Canada, some for as long as four days. A government report estimates the cost of the outage at between $4 billion and $10 billion in the United States alone.
2005: Congress passes the Energy Policy Act of 2005. The act includes repeal of PUHCA, which supporters claim will lead to greater investment in utilities. The act also creates a mandatory reliability organization with the power to impose fines on utilities. In July 2006 the government appoints the industry’s existing self-regulatory body, NERC, to be the new, higher-powered reliability watchdog under the ultimate authority of the Federal Energy Regulatory Commission (FERC).
2006: Line losses increase to 10 percent, compared to 5 percent in 1980, because overloaded power lines cannot handle today’s demand. These line losses cost electricity consumers approximately $12 billion a year.
2006: Thousands of electricity consumers in New York, California, St. Louis and Chicago lose power as the system struggles and ultimately fails to keep up with demand triggered by summer heat.
- Electric power demand continues to surge, rising by almost 20 percent in summer months over the next 20 years.
- Planned transmission capacity continues to lag far behind, with only a 3.5 percent rate of growth. This will compound the problem created over the last decade, when electricity demand in the United States has grown by roughly 30 percent but transmission capacity by only 15 percent.
- Meanwhile, the Galvin Electricity Initiative builds prototype demonstration projects that prove perfect power is possible.
- To balance supply and demand, the electric power industry must agree to double the rate of investment (from 10% to 20% of annual revenues) in infrastructure. The costs of this expenditure get passed on to consumers, who demand answers and change.
- Or, the electric power industry, fearful of the political and commercial ramifications of investment and resulting rate hikes, does nothing. Power becomes increasingly unreliable for consumers, who demand answers and change.
- Consumer demand sparks investment, innovation and political will to implement the sustainable perfect power system. The lights go on and stay on for good.