BLACKOUT RISK ON RISE : DEREGULATION, DEMAND BLAMED FOR INSTABILITY.

Byline: Daily News staff and wire services

Soaring demand, industry deregulation and complex trades in electricity across the West are making the nation's biggest power grid more prone to widespread failure, watchdogs say.

This summer's two major blackouts might have been smaller if not for the power grid that lets utilities swap electricity around the region, moving it from where supply is the cheapest to where demand is the greatest.

The West's interconnected system, with 88 member utilities and more than 112,000 miles of transmission lines across 14 states, covers the most territory of any of the continent's nine regional grids.

In the July 2 outage, sweltering residents of Utah, Idaho and California were turning on air conditioners and drawing huge amounts of electricity supplied by dams in the Northwest and coal-fired plants in Wyoming and Utah.

Saturday's outage still is under investigation, but what officials do know is that it was a case study in the domino effect:

At 2:01 p.m. Saturday, a sagging transmission line 60 miles east of Portland, Ore., sent an arc of electricity into the trees. The line short-circuited, and the resulting surge of electricity knocked out two other lines in Oregon during the next 50 minutes.

At 3:42, another sagging line short-circuited over a filbert orchard just west of Portland. Five minutes later, two units at the McNary hydropower dam on the Columbia River sensed the system's instability and shut down automatically. One minute after that, voltage fluctuations shut down the main connection from Oregon to California.

Utility officials defended the system as an efficient way to balance supply and demand - especially as the West, the nation's fastest-growing region, continues to demand more electricity.

``If each part of the region had to build power plants to meet peak demand, we'd have power plants that were idle most of the time,'' said Dulcy Mahar, spokeswoman for the Bonneville Power Administration, a giant utility that markets Columbia River hydropower.

But watchdog groups are concerned that power outages may become more common as deregulation increases the number of energy suppliers using the grid to transmit power. The idea behind deregulation is to cut consumers' costs by giving them a choice in who provides them with electricity.

The reality, if not monitored closely, could be messy, said Bob Finkelstein, attorney for a San Francisco-based consumer group called Toward Utility Rate Normalization.

``The system that's been unusually taxed twice this summer is going to be facing even heavier traffic in the next few years,'' Finkelstein said.

The California Public Utilities Commission expressed concern Tuesday that Washington's Bonneville Power Administration may reduce its output, leaving the Golden State in a precarious position.

Bonneville declared an emergency Monday, a potential prelude to cutting electric exports to other states. As of Tuesday, California's utilities were operating at 5 percent reserves, below the preferred minimum of 7 percent.

CAPTION(S):

Chart: (1--color) Power out

(2--color) Cascading outage

(3--color) H eat wave

Sources: Western Systems Coordinating Council / Ap research

AP/Tracie Tso