FTN – 8/17/03

BOB SCHIEFFER, Chief Washington Correspondent: Today on Face The Nation, the blackout of 2003. Could it happen again? The country's biggest blackout affected seven states and left 50 million people powerless. Some states' problems remain. But what caused it? And how vulnerable is the rest of the country's electric grid? How much will it cost to fix the system?

These are the questions for Energy Secretary Spencer Abraham, former Energy secretary, Governor Bill Richardson of New Mexico, Michigan's governor, Jennifer Granholm, and Michehl Gent, who's investigating the blackout.

I'll have a final word on last week's real heroes. But, first, the blackout of 2003 on Face The Nation.

ANNOUNCER: Face The Nation with CBS News Chief Washington Correspondent Bob Schieffer. And now from CBS News in Washington, Bob Schieffer.

SCHIEFFER: Good morning again. In the studio with us this morning, Energy Secretary Spencer Abraham.

Thank you for coming, Mr. Secretary.

SPENCER ABRAHAM, Secretary of Energy: Yeah.

SCHIEFFER: And with us from Santa Fe, New Mexico, governor, and former Energy Secretary, Bill Richardson. We begin with Secretary Abraham.

The power is back on in the East as far as we know. Mr. Secretary, are other sections of the
country as vulnerable as this part of the country was?

ABRAHAM: Well, it's hard to answer that till we know exactly what the cause was. But, you know, the challenge for us is getting to the heart of it and determining what other changes need to be made to make sure this doesn't happen. In a long-term sense, though, I think it's clear, we need to increase the amount of transmission capability we have in this country because we demand more electricity. It's going -- that demand is going to grow over the next 20 years. And the transmission system has to be modernized and brought up to date so it can meet that challenge.

SCHIEFFER: But you really can't say whether this could happen again to the other sections of the country?

ABRAHAM: Well, it hasn't happened, obviously, at this magnitude in a very long time. And we're encouraged by that fact. But we've launched an independent investigation. We'll be cooperating and working together with the Canadian government to do this, and my counterpart and I are the co-chairs of a task force the president and the prime minister of Canada have put together. And we will be as dogged in pursuing the answers as we can, and do it as quickly as we can.

But until we finish that process, we aren't going to jump to conclusions. But I feel confident talking to the people on the front lines that things are both up and running and they feel equipped to deal with this.

SCHIEFFER: I've seen some estimates that it may cost up to $50 billion to fix this. Who is going to pay that?

ABRAHAM: Well, I think the type of money you're talking about relates to the need for modernization on the transmission grid. Ratepayers, obviously, will pay the bill because they're the ones who benefit. And that's where most of the responsibility ultimately will be assigned.

SCHIEFFER: Wait, wait, wait. Let's back up.

ABRAHAM: Right. Right.

SCHIEFFER: Ratepayers -- that means people who pay in their electric bills.

ABRAHAM: Right. It does. That's right.

SCHIEFFER: So you're saying the customers are going to have to pay for this?

ABRAHAM: The rate structure is designed to not only be able to underwrite the generation of electricity, but its delivery. And obviously that's a long-term cost. It's not going to all be borne in one year or a short period of time.

But that's the kind of long-term investment that will be needed to keep the transmission system in a situation where we have the ability to both avoid blackouts on the one hand and deliver power to people at an affordable level. I mean, the fact is that Americans and people throughout the world demand more electricity, want it affordable, but they got to -- we got to get it there. It doesn't come out of the wall.

SCHIEFFER: Well...

ABRAHAM: It comes out of a long transmission distribution chain.

SCHIEFFER: Excuse me for asking, but, I mean, aren't the companies going to have to bear some of this cost?

ABRAHAM: Well, of course, they will, and get -- obviously, we know that rate structures are set in a fashion that allows for some sort of reasonable return on investment. And that means that the users are going to play a role in paying for it.

SCHIEFFER: The president said the other day he looks on this as a wake-up call for the American people. But the fact is this alarm clock went off a long time ago. I mean, I'm looking at research that says five years ago a federal task force warned that reliability of the electrical systems based on voluntary standards means that something like this could happen.

They concluded that failure to act will leave substantial parts of North America at an unacceptable risk. That was five years ago. Two months ago, your own people warned that it was not a question of when this was -- a question of if this was going to happen but when it was going to happen. So this wasn't a wake-up call.

ABRAHAM: We took office in the middle of the California blackouts. The president, his first week, put in place a task force to develop an energy plan. We did that in May of 2001. And a highlight of the plan was the need to modernize and expand our transmission grid, make it more able to deal with 21st century demands.

And we've been calling for energy legislation since May of 2001. The people who need to be woken up are the people who have said we can keep putting off the passage of that legislation or that we don't have an urgent problem in front of us. We've been saying that from day one. I think what the president meant to convey was that, unfortunately, it takes these kinds of crises to bring about productive action. I hope now we'll have congressional action.

SCHIEFFER: But what your critics will say is that, yes, you did put this into your energy plan, but you refused to separate it out from the controversial part of the plan that says, `We want to drill for oil in the Arctic Wildlife Refuge,' and that you won't take it out because you want to get that passed and you want to keep this in there as sort of hostage to whether or not you get permission to drill in the ANWR.

ABRAHAM: Well, the reverse can be said of our critics. They, in spite of the urgent challenges on a variety of energy fronts, their adherence to one particular issue has been part of the reason Congress hasn't acted. But the fact is we've got a variety of energy challenges.

It's not just transmission. We have shortages right now in natural gas supplies, in storage. We've had the California blackouts. We've had a variety of problems, and we need comprehensive energy legislation that addresses all of these parts, not just pulling out one part and then leaving the rest vulnerable to these kinds of problems in the future.

SCHIEFFER: But this -- and I won't keep beating this horse, but would you be willing to separate this out from the other part of the energy bill?

ABRAHAM: I think that would be a huge mistake because we have a lot of problems in the energy sectors, and I don't think legislation will pass if you pull it out one piece as a time. Moreover, it'll leave us vulnerable to other challenges and crises.

SCHIEFFER: All right. Well, good luck to you...

ABRAHAM: Thank you.

SCHIEFFER: ...in solving this, Mr. Secretary.

Let's get a slightly different point of view. Now let's turn to Governor Bill Richardson, the governor of New Mexico. He had the job during the Clinton administration that Secretary Abraham has now.

I'd ask for your reaction to what you heard from the Energy secretary, Mr. Richardson, Governor Richardson.

GOV.BILL RICHARDSON, D-New Mexico; Former Energy Secretary: Well, Secretary Abraham is a good man and I think he's doing a good job, but I think we have to go a lot further than what he suggested.

I think the president has to make it a major priority to get the Congress off the dime to pass mandatory reliability standards. I think the cause of this blackout, the Ohio companies, was because of overload. And right now companies -- the utility companies don't face mandatory reliability standards. In other words, they can overload without penalties. It's only voluntary.

Secondly, we've got to build some new transmission lines, regional transmission lines. I think the second step the administration could do was eliminate that sweetheart deal that the Southern company, a utility, has made in the Congress to delay the development of more robust transmission lines until the year 2007.

Third, I believe we need to develop some regional transmission organizations, one single operator in each region, so that we don't have this duplication and these fights between federal and state regulators.

Fourth, we need more of an emphasis on new technologies, distributed generation powered by renewable energy. What that means, Bob, is that -- for instance, the Bush administration cut funds for energy efficiency programs. We need to get distributed generation that has been fuel cell-powered, that has other technology components accelerate the research there, so those funds need to be restored.

Lastly, you know, it's still a hot summer. One of my last acts as Energy secretary was put on some very tough air-conditioning standards, increasing manufacturers to improve their air conditioning by 30 percent. Well, the manufacturers came in after the Clinton administration left office and the Bush people changed the standards to a lesser standard.

SCHIEFFER: Well, let's...

RICHARDSON: That needs to be restored. It's still very hot, and we need to take those steps.

SCHIEFFER: Let me just go back when you were the Energy secretary, because as I just brought up to Secretary Abraham, it was five years ago that a federal task force warned that this was going to happen and something should have been done. Why were you unable to get anything done back then? That was on your watch.

RICHARDSON: Well, I'm glad you asked, because I went around the country, and it's documented -- I held 13 reliability summits warning that this could happen. We, the Clinton administration, pushed this--mandatory standards in the Congress. The Republican Congress did not respond. They didn't want to move in this direction. So I think the administration and that study that you mentioned, the power outage team -- that was our recommendation to the Congress. It didn't happen, so I feel that, on our watch, we did everything we could.

Now I don't think it makes any sense to point blame. I think what we need to do, Bob, is -- the Bush administration, the Congress should strip out those provisions that are controversial -- nuclear and coal subsidies, the drilling in Alaska -- and pass a single reliability standard, stand alone, develop regional transmission lines, increase investment in some of the transmission lines...

SCHIEFFER: OK.

RICHARDSON: ...by having rules of regulatory certainty. There are so many steps that should be taken right now that might avoid...

SCHIEFFER: Let me...

RICHARDSON: ...a potential blackout in the future.

SCHIEFFER: Let me ask you about something that Secretary Abraham brought up here. I asked him who was going to pay for this, and basically, he said the electric customers are going to have to pay for it. I -- do you think that's correct?

RICHARDSON: Well, what this means, Bob, is that we're talking about billions of dollars. The utilities should pay for it. But eventually it's going to be passed down to the customer.

And this, I think, has been one of the reasons a lot of utilities have not increased their investments in new technologies and in building new transmission lines, because they know that state rate entities are not going to let them pass on this to their customer.

So I think, just to say one last point, utilities do need rules of the road so that they can have more investment in the regional and the transmission lines in this country. And, you know, sometimes the public doesn't want any kind of transmission lines built on their back yard. So there's plenty of blame to go around. I think we have to move forward and, on an emergency basis, when the Congress comes back, take those steps that I suggested.

SCHIEFFER: One of the things we haven't talked about this morning I want to ask you about, and that is the whole idea of terrorism. As far as we know, terrorism did not play a part here. But it seems to me that this just underlines how vulnerable our power system would be if the terrorists did attack. I mean, you could almost see a terrorist sitting there taking notes as this thing unfolded. How concerned are you about that?

RICHARDSON: Well, I'm very concerned, because this incident, which was possibly a systems overload, indicates that we're extremely vulnerable, that if I'm a terrorist sitting and trying to plan an electricity grid attack, it's going to be very easy to do it. What is needed is for the Homeland Security Department to conduct a threat assessment and see how we can get some kind of federal support in the security of our nuclear power plants, of our electricity grid.

Industry has not been good in terms of security. I'm not saying that we pay for that security, but there have to be a threat assessment, an emergency plan, and I think we start with our electricity grid that has shown to be enormously vulnerable, yet it is enormously valuable because we're all depending on it.

SCHIEFFER: Governor Richardson, thank you so much. We appreciate your perspective this morning.

RICHARDSON: Thank you.

SCHIEFFER: And we'll be back in a moment with more on this power blackout.

(COMMERCIAL BREAK)

SCHIEFFER: And we're back now.

With us who's in -- she's in Indianapolis this morning, Michigan's Governor Jennifer Granholm.

Michigan, of course, was one of those states that was very hard hit. And joining us from Princeton, New Jersey, Michehl Gent. He's the president and CEO of the North American Electric Reliability Council. He is doing most of the investigation on this.

Let me go to you first, Governor. How are the folks in Michigan doing?

GOV. JENNIFER GRANHOLM: I'm pleased to say that 100 percent of our residents now have power, although when we started this, we have to remember that 60 percent of Michigan was blacked out. It was a huge deal. It was the largest blackout in Michigan history, but right now a hundred percent are back up.

SCHIEFFER: Are you still boiling water in Detroit?

GRANHOLM: Yes, the boil water order will go on through today and tomorrow. I think -- in fact, we're up, I should say, but we don't have 100 percent capacity and we're still concerned about the quality of the water. So there still is a boil water order.

SCHIEFFER: Let me -- we'll certainly come back to you, Governor. Let me go to Michehl Gent who's been providing a lot of the information that the American people have been getting about this.

Mr. Gent, I take it we have now isolated the main problem to those power lines in Ohio. So we know this is where it started, but the question I want to talk to you about and the one that I think is more serious is this system was supposed to be designed to isolate a problem when something like this happened and clearly that didn't happen. What happened and how do we fix that?

MICHEHL GENT, President and CEO, North American Electric Reliability Council: You're absolutely right. It was supposed to isolate the area. In this case, it would be the area surrounding Cleveland. So we might have the Cleveland area black but at least the rest of the grid would have been up and running.

What we're doing is we're taking a look at all of the logs. We've collected data, thousands and thousands and thousands of data points, probably 100,000 data points, and we're sorting through this, putting it in chronological order, trying to make sense out of it. And we'll get to the bottom of the problem.

And as you've stated, the next issue we have to clarify is: Why did that not isolate the Cleveland area? And we'll find the answer.

SCHIEFFER: But you don't have any idea at this point?

GENT: Well, we have lots of theories and that may be how we have to go at it is to come up with various scenarios and then disprove scenarios until we get one that works.

SCHIEFFER: I just asked Spencer Abraham, the secretary of Energy, if he thought the rest of the country would be vulnerable to something like this. And basically his answer was, `We're not really sure.' What's your take?

GENT: Well, my take is that we're not. And, of course, my take was that we weren't vulnerable to this one either.

SCHIEFFER: Uh-huh.

GENT: But I believe that we have a combination of things going now, this extreme awareness by our operating people and the fact that we're going out now and collecting even more data to display, alarms to be rung. And I think we'll be operating in a very conservative mode until we figure out exactly what was going on.

SCHIEFFER: Governor Granholm, what do you want from the government right now? What will it take in your view to fix this?

GRANHOLM: You know, I speak for those who want to flip the switch and see the power come on. All of the technical issues about the investigation, etc., are lost on, I think, most Americans. The bottom line is if somebody gets into an elevator, they want to make sure they get out. If somebody turns on their tap water, they want to make sure that water comes out that is safe.

And the question is: Who is responsible, what is the problem and how do we fix it? Who is going to be held accountable and how are the penalties enforced? If there are voluntary standards, then clearly we are not providing enough of a stick or perhaps a carrot to make sure that the system is reliable. So we need to invest clearly in the transmission system, but we need to hold whoever is responsible accountable and let the whole industry know that that's going to be taking place.

SCHIEFFER: Well, of course, the electric power industry like the airlines, like the telephone companies have been going through deregulation which everybody says is good for business.

Do you think perhaps we've gone too far in that direction? Do we need more federal control here?

GRANHOLM: Well, just look at this. Several years ago, when the system was integrated as they say, and what that means for people is that right now we have a system where the generation of power, the transmission of power and the distribution of power may be owned or operated by completely different entities. Several years ago, the generation, the distribution and the transmission were all owned by one company. So several years ago, you might be able to point to who was responsible, who failed to invest, hold them accountable. Today, it is more diffuse. And so the question is everybody ought to have an open mind about the best way to go forward, not to get into philosophical differences about regulation vs. deregulation.

Some parts of the old system work. Perhaps, some parts of the new system worked, but whatever it is that's combined right now is not working and it needs to be fixed.

SCHIEFFER: OK. Mr. Gent, let me ask you about this whole question of terrorism. As far as we know...

GENT: Right.

SCHIEFFER: ...this had nothing to do with terrorism, but does it suggest that perhaps we're more vulnerable, our power grid is more vulnerable to terrorists than we were willing to recognize? And I would also ask you this, everybody says, `No, it wasn't a terrorist act,' in the fact that somebody set off a bomb, but are we satisfied, or do we know for sure yet, that somebody didn't hack into this software for whatever reasons?

GENT: Yes, we're probably 99 percent sure, if you need to have a number.

We have, in fact, a task force meeting this morning at 11:00 with the Department of Homeland Security to address that issue. We've collected the cyberexperts that we have available to us, and we are making them available to the Department of Homeland Security. We think that this is a case -- we're sure it's not physical, we're almost as sure that it's not cyber, but we have to really, really dig through all of the data to make absolutely sure. And we're doing that. I think the American people are worried about this. And so we're going to put extra effort on this, even though it's taking time away from finding what the real problem was and what we're going to do about it.

SCHIEFFER: Well, I mean, the fact is the software failed here, did it not?

GENT: The software may have failed. We know that we did not get alarms from one of the electronic measuring units that were audible alarms. They were visual on a screen and we need to find out what happened in that system.

SCHIEFFER: So you're going to meet, and this will be one of the things that you will address this morning?

GENT: Yes. And as we've done in the past, we will try to provide timely updates to everybody. We want this to be as open and credible as possible. And I commend the governor for what she's saying. I really think she's put it very well and I hope she'll keep telling that story.

SCHIEFFER: Well, Governor, I'll give the final word to you. Certainly watching the people of Detroit, the people of your state, the people of New York, it was an inspiration to all of us. It must have been an inspiration to you as well.

GRANHOLM: It was a true statement about the nobility of the Michigan and the American spirit, truly. We had so many volunteers and donations, people coming together, and really realizing, I think, for 50 hours, what's more important than what is plugged into a wall is that we connect with one another.

SCHIEFFER: Thank you very much, Governor.

Mr. Gent, thank you. We'll be back with a final word in just a moment.

(COMMERCIAL BREAK)

SCHIEFFER: Finally today, just ask the political consultants and they'll be glad to tell you: the way to get elected is not to find consensus or look for compromise, but to find issues which divide people and paint those issues in the most extreme terms. There can be no middle ground, no gray area. Make it black and white, force people to choose, convince them your way is the only way. Military strategists call that divide and conquer. Politicians and consultants call it driving wedges.

So it's not surprising that one of the first things that happened when the blackout came was that it set off a blame game among the politicians. Not surprising, but not the lead, as we say in the news business, because while the politicians were plotting ways to avoid blame, the American people went to work, as they always do when the going gets tough.

A long time ago, someone said that in wartime there are no atheists in foxholes. And my guess is there are no partisan Republicans and Democrats in a crowded subway car that is stalled underground in pitch-black darkness.

So it was that in Cleveland and Detroit, New York and so many other places Americans did not panic, they did not try to place blame. They came together, directed traffic, gave each other food and shelter, and just did what had to be done to help each other cope with all this.

Once again, they are the heroes.

We elect our leaders to show us the way and to set an example, but our politics has grown so Partisan, it is the people who are setting the example for the leaders. Sadly, many of our leaders have yet to notice.

That's it for us. We'll see you next week right here on Face The Nation.