Seventies, the

Electric Perspectives, Jan/Feb 2006

It was the energy crisis decade-the electric industry would never be the same. And issues of the new Electric Perspectives documented how people in the industry were wrestling with the changes.

1976 was the year of the U.S. Bicentennial celebration and tall ships. Jimmy Carter and Gerald Ford were the main candidates in the presidential election, which Carter won. Apple introduced the Apple II, the first all-purpose home computer. Mao Tse-tung, Howard Hughes, and J. Paul Getty died.

But, compared to years before and years after-and depending on where you sit, of course-1976 was not a year chock full of milestones or seminal events, even in such an eventful decade.

And there weren't many single events that affected the electric utility industry, either, at least on a national level. Congress did pass the Resource Conservation and Recovery Act (RCRA), establishing a system for the management of nonhazardous and hazardous solid wastes. The industry deals with this act every day now in terms of solid waste, particularly from electricity generation; once a year, utilities, along with other industries, publish their "toxic release inventories," the most public aspect of RCRA (although electric utility TRI was a later addition to the law).

In 1976, also, statewide ballot propositions to phase out nuclear power plants and ban new ones failed to pass in Arizona, California, Colorado, Montana, Ohio, Oregon, and Washington. Despite solid majorities that defeated the initiatives, California enacted a law that halted new nuclear plant construction, pending a determination by the state energy commission that the federal government would build a high-level nuclear waste repository.

Depending on where you sit, of course, those events might be seminal. But 1976 did nor have Watergate, the Vietnam War, the new Environmental Protection Agency, the first Earth Day, the Clean Air Act, the Water Pollution Control Act, an Arab oil embargo, the new Federal Energy Administration, or the institution of the national 55-miles-per-hour speed limit. And it was not the year of the National Energy Act (which included the Public Utility Regulatory Policies Act), the new Department of Energy (DOE) and Federal Energy Regulatory Commission (FERC), a second oil embargo, the New York Blackout, or Three Mile Island.

The first issue of Electric Perspectives came out in 1976. In a sense, its goal was to offer higher-level, longer-range philosophical thinking for executives who needed to see the complexity of stakeholder views during a time of cultural and economic change. The magazine arrived at the right time. 1976 was the eye of the Seventies storm, if you will, a storm that included environmental and consumer activism, a loss of faith in institutions, an energy crisis, a poor economy, and inflation. How utilities dealt with new regulation, new environmental concerns, and the new needs and desires of the customer changed for good.

Tough Times

The 1970s were a difficult time for the U.S. economy. Inflation grew at a fast pace, surpassing 10 percent by the middle of the decade, and economic expansion slowed.

One result was that the utility industry saw little load growth, despite predictions. In the 1960s, demand had risen at an annual rate of 7.5 percent. It weakened as the energy crisis grew in the 1970s; it even declined from 1973 to 1975, in part due to U.S. energy conservation measures. But the previous decade's demand increase led to the construction (or planned construction) of many large power plants, primarily coal and nuclear. Because they took many years to build, inflation increased predicted costs, and financing became more expensive. New regulatory requirements served to lengthen the process even more. Once the plants were completed, reduced load growth resulted in large generation capacity reserve margins.

Utilities legitimately passed the increases to electricity consumers, though often in dramatic price increases. Between 1970 and 1985, electricity prices quadrupled. Residential customers paid an average of 2.1 cents per kilowatt-hour in 1969 and 4.3 cents in 1979. Industrial customers paid 0.9 cents per KWH in 1969 and 2.9 cents in 1979.

Arguably, the defining theme of the 1970s was energy. The 1973 Arab oil Embargo changed the world oil market. America's oil production peaked in 1970 at 10 million barrels a day. (It has never reached that level again.) Demand kept climbing, however, and in three years we went from importing 20 percent of our oil to 35 percent. The price per imported barrel rose from around $2 in 1969 to $15 in 1975. The central role of energy in consumer life became plain. There were shortages, rationing, and long lines to purchase gasoline. The federal government imposed a nationwide speed limit of 55 miles per hour and created a strategic petroleum reserve. "Right turn on red," because it theoretically improved traffic flow and avoided needless idling, became legal.

The 1973 energy crisis raised electric generation fuel prices. In 1972, oil accounted for 16 percent of total U.S. electricity generation, and natural gas accounted for 21 percent. But most everyone seemed to think that natural gas was running out; and the Energy Supply and Environmental Coordination Act of 1974 required utilities to stop using natural gas or other petroleum-based products to generate electricity. (Later, the Power Plant and Industrial Fuel Use Act of 1978 and the National Energy Conservation Policy Act of 1978 would also contribute to further reductions in the generating capacity of large powerplants.)