The first utilities were neighborhood affairs. Thomas Edison's first central power plant in lower Manhattan served 59 customers and 12 city blocks. The plant generated 72 kilowatts (kW) of power. (A 1 kilowatt power plant produces 1 kilowatt hour (kWh) of electricity per hour, enough to keep a typical 100-watt light bulb burning for 10 hours).

Technological improvements gradually pushed small power plants off center stage and, eventually, off the stage completely. In 1901 the Hartford Electric Authority installed a 2,000 kW plant. By the 1970s a new power plant produced 1 million kW. Two or even three such plants in a single location could serve 2 million to 3 million households, equivalent to all those in Minnesota, North Dakota and South Dakota.

Technological advances allowed transmission lines to carry ever-larger quantities of electricity ever-further. In 1896 George Westinghouse's Niagara Falls plant supplied the Buffalo, N.Y., railway 22 miles away. In 1902 a power plant in the San Francisco area transmitted electricity 200 miles. Today very high voltage transmission lines carry electricity from British Columbia to southern California and from Wyoming to the Twin Cities.

The result? Customer-produced power virtually disappeared, falling from 60 percent of all electricity generated in 1900 to 20 percent in 1930 to under 4 percent in 1980.

And then, when it seemed that decentralized power had been relegated to a historical footnote, the trajectory abruptly changed. Rising interest rates in the 1970s made it increasingly expensive to build large power plants, while rising electricity prices and a weakening economy made it increasingly difficult to predict demand. In the early 1980s, when electricity demand fell for the first time since the early 1930s, nuclear-based utilities from New England to Washington state declared bankruptcy. Overcapacity plagued utility companies for the next 15 years. Construction of large central power plants slowed to a trickle.

Meanwhile, rural residents increasingly opposed the proliferation of high voltage transmission lines cutting through their back yards. They protested the visual pollution and feared the public health consequences of increased electromagnetic radiation. Minnesota was home to some of the most dramatic battles.

In 1978, Congress changed the electricity rules. It abolished the century-old monopoly that utilities had over electricity generation. In the future, utilities would have to purchase electricity from independent power producers as long as these producers relied on renewable fuels like wind or sunlight or on high-efficiency cogeneration power plants that captured the waste heat for useful purposes.

The independent power industry grew so rapidly that by 1990 most new electrical capacity was owned by nonutility enterprises. Rather than betting the company on one $2 billion nuclear power plant that took 10 years to come online, these unregulated entrepreneurs invested $50 to $100 million in small power plants that came online in less than a year.

The size of the typical independently owned power plant built in 1990 was closer to one built in 1925 than to one built in 1975. And that technological downsizing is accelerating. "Technology is moving toward the end user" is how Renz Jennings, former commissioner of Arizona's regulatory agency, described the dynamic. Allied Signal's new 75 kW power plant has about the capacity of Edison's Pearl Street plant. The washing machine-sized turbogenerator can supply the electrical needs of a small store or restaurant. They're selling like hotcakes. In December 1998, Capstone Turbine Corp. shipped its first two 30 kW microturbines. In November 2000 it shipped its 1,000th.

Hospitals in Ontario and California, airports in New York and Michigan, breweries and retail stores and restaurants and convention centers in Illinois have already installed their own power plants. Paul Colgan, director of public affairs of the Building Owners and Managers Association in Chicago, declares, "It's something we feel that every commercial property owner should look at." Decentralized power is going mainstream.

Meanwhile in rural areas, wind is the fastest-growing source of electricity. Farmers view the 750 kW wind turbines as welcome income at a time of Depression-level commodity prices. And solar cells, tiny devices that generate electricity using sunlight, are now being embedded into roof shingles. In Sacramento, Calif., several hundred homes boast rooftop power plants.

Today the delivery of electricity can cost more than its generation. It can be cheaper to build a small power plant at the end of a distribution line than upgrade the line. That's what the New York City Police Department recently discovered. To upgrade distribution lines to its 150-year-old Central Park police station would cost $1.2 million and impose a heavy toll on the landscape. The department opted for a 200 kW fuel cell, about the size of a large garden shed, which now supplies all its power and also recharges nonpolluting electric vehicles used by the police to patrol the park.

The nation's 900 rural cooperatives own about half of the country's distribution lines. Nearly half of these lines were installed over 40 years ago and soon will require upgrading. Low customer densities means the cost of upgrading will be borne by relatively few ratepayers. These are excellent locations for dispersed power plants.

Increasing numbers of businesses are turning to self-generated power not because of price but because of reliability. For computer-dependent companies, the business loss from power outages can run as high as $5 million to $7 million an hour. Craig Schuttenberg, vice president of Chicago consulting firm Energy Choices, insists, "If power reliability at a business is a question, you're much safer with your own power."

We are bombarded by stories about California's tragic power situation. But the most important story of all goes unheralded: California's embrace of a new power paradigm. In his State of the State address, Gov. Gray Davis announced that he would require state universities and community colleges "to move toward energy independence." In September he signed a bill "to increase self-sufficiency of consumers of electricity through the deployment of self-generation and cogeneration."

California is not the only state to seriously embrace decentralized power. Texas is developing a system for certifying decentralized power plants the way boilers and furnaces are now certified. Simplified interconnection standards and tariffs that favor rather than discriminate against self-generation are being implemented in California and New York and Texas.

Minnesota can and should learn from the pioneers. We are in an excellent position to do so. We need an additional 2.5 million kWs of capacity by about 2008. That instills in us a sense of urgency, but not of panic. We must do something soon. But we have the time to get it right.

Regrettably, so far we appear to be pursuing policies better suited to 1970 than to 2000: accelerating the construction of high voltage transmission lines and large, fossil-fueled central power plants. The powers-that-be approved with nary a qualm the merger of Northern States Power with a Colorado-based utility, a step that even further separates those who make our electrical decisions from those who feel their consequences.

We need a change of focus. We may indeed need new transmission lines, and new coal-fired power plants. But first focus on getting more out of what we have. See how much electricity we can generate on our farms and within our industries and businesses and households. Only when we have exhausted the possibility of local self-reliance should we pursue dependence.

Back in 1982, I wrote a book called "Be Your Own Power Company." It predicted the new decentralizing dynamic in electric generation and concluded with an observation I still believe is valid. "The economic attractiveness of decentralization is becoming ever more apparent. Yet to emphasize only the economic value of decentralization would be a mistake. The political and psychological value of a widely distributed capacity to produce a commodity as essential as electricity is equally important. Self-reliance was a major objective of the nation's founders. Benjamin Franklin once remarked, 'The man who trades independence for security usually deserves to end up with neither.'"

Over the last 100 years we relinquished our control over electricity production in return for a promise of lower prices and increased security. Today, at least for the citizens of California and Oregon and Washington and Idaho, that trade has resulted in both higher prices and less security.

The potential is there for Minnesota to generate substantial amounts of electricity within our communities. A few years ago the owners of the Koch refinery in Hastings told the Legislature they produced enough waste petroleum coke to fuel a 400,000 kW power plant. The electricity produced would have been very inexpensive. But under a Minnesota law that is a relic from a time when the state had a surplus of electricity rather than today's shortage, NSP had the right to lower its price to discourage Koch from pursuing the project.

I hope the LTV taconite facility can be reopened. But if it cannot, the power plants there could provide another 225,000 kW of capacity. The Rahr Malting plant in Shakopee wants to use grain dust to fuel a 12,000 kW power plant. And this is just a fraction of the possibilities.

One way or the other, we are going to invest, or have invested on our behalf, at least $3 billion over the next eight years to generate the electricity we need. Our challenge is how to establish policies that channel entrepreneurial energy and scientific genius and investment capital in directions compatible with our long-term objectives. Wind farms, on-site cogeneration plants, household fuel cells, regional wood-fired power plants, rooftop solar cells, can provide the foundation for an electrical future in which we become not only consumers, but producers as well.

David Morris is vice president of the Minneapolis-based Institute for Local Self-Reliance and author of the forthcoming ''The New Power Rules: Democratizing the Electricity System.''

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