I am often asked what I primarily worry about, or what keeps me awake at night. Certainly, I worry about the possibility of cascading defaults by counter-parties in the lightly-regulated, heavily-cloaked derivatives industry.
After that, however, I have been worried about the economic consequences of a successful terrorist attack on our national electrical grid. A new report by the Federal Energy Regulatory Commission (FERC) states that successful attacks on just nine of the nation's 55,000 electrical transmission substations could plunge the nation into darkness for weeks and maybe up to 18 months. The economic effects of the 9-11 attacks would seem insignificant in comparison.
Late one night last April, a car pulled off a freeway near San Jose, California. Somebody or some people hiked over one hill to the Metcalf substation and spent nineteen minutes firing assault rifles into the substation, destroying seventeen transformers. This was the substation that serves the critically-important Silicon Valley. If this had happened during daylight hours in August, when air-conditioning puts greater demands on the system, it is widely believed that Silicon Valley could have gone dark for weeks. And, that was using regular 7.62 mm ammunition. Imagine the damage if they had used a .50 caliber with armor-piercing ammo, which is available to almost everybody in the U.S.
These substations tend to be remotely located and unprotected, except for barbed-wire fencing and cameras. The FERC has required utilities to respond by June on how to "harden" their substations. Dominion Resources (D) here in Virginia plans to spend $300-500 million over the next seven years to improve protection of their substations. The "Happy Face" spin is that it looks like something is finally happening. Another spin is that why have we waited over twelve years since 9-11?
Maybe, Worry #3 can move up to the second position soon . . . I hope so!
After that, however, I have been worried about the economic consequences of a successful terrorist attack on our national electrical grid. A new report by the Federal Energy Regulatory Commission (FERC) states that successful attacks on just nine of the nation's 55,000 electrical transmission substations could plunge the nation into darkness for weeks and maybe up to 18 months. The economic effects of the 9-11 attacks would seem insignificant in comparison.
Late one night last April, a car pulled off a freeway near San Jose, California. Somebody or some people hiked over one hill to the Metcalf substation and spent nineteen minutes firing assault rifles into the substation, destroying seventeen transformers. This was the substation that serves the critically-important Silicon Valley. If this had happened during daylight hours in August, when air-conditioning puts greater demands on the system, it is widely believed that Silicon Valley could have gone dark for weeks. And, that was using regular 7.62 mm ammunition. Imagine the damage if they had used a .50 caliber with armor-piercing ammo, which is available to almost everybody in the U.S.
These substations tend to be remotely located and unprotected, except for barbed-wire fencing and cameras. The FERC has required utilities to respond by June on how to "harden" their substations. Dominion Resources (D) here in Virginia plans to spend $300-500 million over the next seven years to improve protection of their substations. The "Happy Face" spin is that it looks like something is finally happening. Another spin is that why have we waited over twelve years since 9-11?
Maybe, Worry #3 can move up to the second position soon . . . I hope so!
