After years as the electricity industry’s the neglected stepchild, America’s high-voltage transmission grid is beginning to get new attention and a flow of new investment. The huge Northeast blackout on Aug. 14, 2003, dramatized Dept. of Energy claims that the steady increase in power outages in the last decade was costing the U.S. economy about $100 billion per year. It came on top of growing awareness among utilities and regulators that congestion on the grid was driving up the cost of electricity by over $500 million per year as customers could not access the low-cost supplies.

The California crisis of 2001-2002, with its mix of soaring prices, utility bankruptcies and energy-trading scandals, highlighted this problem, and the blackout led to a flurry of reports and quick-fix proposals to immediately improve grid operations. But no decisive political action yet has resulted.

Investment in the U.S. high-voltage transmission grid fell from $5 billion per year in 1975 to the current $2.5 billion per year, which is considered the rock-bottom minimum needed to maintain the existing system and cope with demand growth. DOE’s Energy Information Administration, under a business-as-usual scenario, forecasts that grid capacity in the U.S. will grow by only 6% through 2012 while demand on the system during that time will grow by 20%. Click here to view chart

A prescient report released a week before the August blackout by the Electric Power Research Institute, Palo Alto, Calif., warned that the transmission system was “likely to be the first point of ‘meltdown’ in the electricity system” in the coming years as the U.S. economy picked up and demand for power grew. Since then, business has picked up.

“We have seen a definite improvement in 2004 and believe that there will be strong investment for a few more years” says William Hansen, vice president of engineering group Power Engineers, Hailey, Idaho. Dean Oskvig, president for power delivery at Black & Veatch, Kansas City, agrees there has been some improvement in the market in 2004. But he says that the number of initial system planning requests from utility and independent transmission company (ITC) clients is up strongly. That should turn into a surge of new jobs in 2005.

Much of the work now under way consists of what one construction industry executive calls “we-just-can’t-wait-any-longer” projects. Utility investment priories or permitting woes had held them back for years, but they are finally being built to meet an obvious need.

For example, the $300-million Path 15 project to expand the link between Northern and Southern California will be completed late this year by a combination of public agencies and private investors, and the $349-million Arrowhead-Weston interconnection between Minnesota and Wisconsin was pushed through permitting by state officials after repeated blackouts in the region.

What is not clear is whether the current burst of activity will fizzle out in a few years as the obvious projects are completed and the pressure to improve reliability created by the 2003 blackout recedes. Key to sustained transmission activity is solving the problem of regulatory uncertainty, say industry sources. Many of the solutions are in the Energy Bill, now bottled up in Congress. The energy bill hangup has also cast doubts over a DOE drive to assume new powers to identify and expedite new interregional transmission projects needed to reinforce the national grid.

The tussle over policies has left the construction industry unsure of the long-term trend. Cindy Andrews, vice president for transmission projects at contractor SNC Lavalin in Calgary, Alberta, says she is “cautiously optimistic” that activity in the transmission sector will continue to improve over the next five to ten years. But Jennifer Tripp, a principal with consultant R.W. Beck in Scottsdale, Ariz., says that...