Current Heat Wave Shows U.S. Sorely in Need of Power Grid Reform

| About: American Electric (AEP)

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Heat Wave Spurs Calls For Stronger Power Grid

  • Summary: With memories of the blackout of the summer of 2003 still fresh, there has been a chorus of calls from both government officials and the private sector demanding the U.S. have a more modern, more powerful grid system. Record temperatures over the last two days have stretched the current grid system -- actually made up of three grids -- to its limit. While rules were supposed to be put in place to assure that a repeat of 2003's blackout across the eastern half of the U.S. and Canada doesn't recur, Congress has been slow in implementing the laws in question. Though the cost of the last major blackout was extremely high -- costing the economy as much as $10 billion -- very little has been done to alter the reality on the ground. Yesterday, a power outage in Southern California caused LAX airport to close down for 90 minutes. Among the current system's greatest challenges are bottlenecks which prevent areas with surplus power to transfer it to regions with experiencing power deficits and a decrease in backup supplies due to rising energy costs and disruptions in energy markets. According to Craig Baker, senior vice president of American Electric Power Co. (NYSE:AEP) which operates the nation's largest private transmission system, it will ultimately be the consumer and private businesses that pick up the costs of overhauling the nation's power system.
  • Comment on related stocks/ETFs: For related articles on the current heat wave hitting the U.S. and its likely affect on the economy, see David Jackson's Heat Wave Raises Power Consumption -- Implications as well as Barry Gitart's Playing the Heatwave: Companies That Profit From Record Heat.

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